Britain's recovery looks fragile

Recent data suggests Britain's recovery may be weaker than hoped.

745-crowd-634

Britain's consumers are cheery

Britain may not see a rapid recovery from the weak growth seen in the first quarter. Recent economic data have been disappointing the manufacturing sector picked up more slowly than expected in May, and surveys of the services sector have also disappointed.

Meanwhile, annual house-price growth dropped to 4.6% last month, the first sub-5% reading since 2013, according to Nationwide. However, mortgage approvals rose by over 6,000 in April, said the Bank of England, the biggest monthly gain in over six years. Consumer confidence remains near 13-year highs.

What the commentators said

A rate rise this year seems unlikely, agreed Capital Economics. But while the recovery is clearly still "a bit fragile", a "sustained slowdown" is unlikely. The main driver should be consumption, which accounts for around 60% of GDP. The labour market is still strengthening, earnings growth should keep climbing, and inflation has disappeared for now, bolstering real incomes.

Real household spending is on track to grow by 3% in 2015, the most in ten years. So with sterling strength squeezing manufacturers, Britain is once again relying on household spending to keep the show on the road, said Alex Brummer in the Daily Mail.

Chancellor George Osborne's vision of a UK "carried aloft by the march of the makers" looks more and more like "a Budget 2011 hallucination", said Alistair Osborne in The Times. Back then, manufacturing comprised 12.8% of GDP; now it's 10%. That's not a march it's "a limp". And it's domestic demand for consumer goods that is propping the sector up.

Of course, we are an economy dominated by sevices. But perhaps Osborne will let us know in next month's Budget where the high-tech exporters, crucial to the rebalancing he's always banging on about, have gone.

Recommended

Let’s adjust to living with Covid and get Britain back to work
UK Economy

Let’s adjust to living with Covid and get Britain back to work

The Covid-19 era is over, leaving a stagnant and lethargic workforce in its wake. It’s time to wake up, says Matthew Lynn.
25 May 2022
Which house-price index is the best?
Property

Which house-price index is the best?

Britain is obsessed with house prices, and we have at least four house-price indices to choose from to measure the rate of increase in the value of ou…
23 May 2022
The world’s hottest housing markets are faltering – is the UK next?
House prices

The world’s hottest housing markets are faltering – is the UK next?

As interest rates rise, house prices in the world’s most overpriced markets are starting to fall. The UK’s turn will come, says John Stepek. But will …
23 May 2022
How not to get beaten by inflation
Inflation

How not to get beaten by inflation

With inflation at 9%, and the bank rate at 1% you’re not going to get a real return on cash. But there are steps you can take to beat inflation, says …
19 May 2022

Most Popular

Everything is collapsing at once – here’s what to do about it
Investment strategy

Everything is collapsing at once – here’s what to do about it

Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect th…
23 May 2022
Imperial Brands has an 8.3% yield – but what’s the catch?
Share tips

Imperial Brands has an 8.3% yield – but what’s the catch?

Tobacco company Imperial Brands boasts an impressive dividend yield, and the shares look cheap. But investors should beware, says Rupert Hargreaves. H…
20 May 2022
Three high-quality FTSE 100 shares going cheap
Share tips

Three high-quality FTSE 100 shares going cheap

As stockmarkets continue to fall, bargains are starting to appear, says Rupert Hargreaves. Here, he picks three high-quality FTSE 100 shares that are …
23 May 2022