After a tough spring, the economy returned to growth in the summer and early autumn – but only just. The slowest annual rate of expansion in almost a decade poses an obvious question: is the glass half empty or half full?
Actually, it’s about a third full at best. There were really only two pieces of good news for the government in the latest bulletin from the Office for National Statistics: the economy avoided two consecutive quarters of negative activity – the technical definition of a recession – and there was a bounceback in construction. Other than that, it was slim pickings.
For one thing, the growth in the third quarter was entirely down to a strong July. In August and September, the economy contracted, which suggests it had little momentum going into the final quarter of the year.
What’s more, the 0.3% expansion in the three months to September was heavily dependent on consumer spending. Business investment was flat over the quarter, as was manufacturing output. Companies are nervous about committing to new capital projects at a time when there is so much Brexit uncertainty.
Meanwhile, the slowing of global trade – in part because of rising protectionism – has made life more difficult for exporters. Unlike in the first three months of 2019, there appears to have been little stockpiling of goods in the run-up to the second missed deadline for Brexit, which could have flattered the third-quarter figures.
Ministers should take little comfort from what was by UK standards – and at a time when earnings growth is running well ahead of inflation – a modest increase in household spending. While there’s no “feel-bad” factor as there was the last time Britain went to the polls in 2017, there’s not much evidence of a “feelgood” factor either.
