The preliminary estimate of GDP in the second quarter was released this week. Output growth increased by 1.7% in the period April to June, compared to the same period a year earlier.
Is the growth rate slowing? Yes is the apparent answer. Compared to the first quarter of the year, growth has slowed from the 2% level reported in the period January to March 2017.
In the first six months of 2016, growth averaged just under 1.7%. For the year as a whole the growth rate was 1.8%. So not much of a slow down in the economy as yet. Analyse the detail and service sector growth was 2.3%. Exclude the public sector, the private service sector growth rate was 2.7%.
The volatile production and construction sectors inhibited growth overall. Construction growth increased by less than 1%. Manufacturing output increased by 0.3%. Mining and utilities output were down year on year. The sectors are volatile and subject to revision. For the year as a whole it seems reasonable to expect growth of around 1.7% to 1.9% despite the looming fears about any EU deal.
Should we worry about growth in the UK this year? The IMF appear to think so. The IMF is warning about the UK current account deficit. The largest of the 44 countries under review, the current account deficit is 4.4% of GDP. The UK must bring down the trade deficit warns the IMF. Financing the deficit risks are "reduced" in the near term. Over the medium term, funding may become a more critical issue.
Slower growth in the UK may suggest the Bank of England may have time to adjust the internal monetary framework. The IMF is giving a clear warning - matters may be taken out of local hands if there is no improvement in the fundamentals of external trade and finance. The Old Lady may be obliged to act to take away the punch bowl but the IMF will turn off the music .... for the moment, the ask is just to turn it down a little ...
A Vision for Transition ...
Theresa May is walking in the Alps, Boris Johnson is waking in Australia, Liam Fox is buying chickens in America. Time to close the borders and pull up the drawbridge. Certification and qualification may leave the absentees without sufficient immigration points to make the home run.
For the moment it is left to the Chancellor Phillip Hammond and Amber Rudd to present the vision for transition. It's a sort of Free trade, inside the customs union, with free movement of labour, all subject to adjudication by the European Court of Justice. Excellent. It's a sort of "Status Quo Ante Referendum". All we need now is an indefinite rolling extension to the transition period for 2020 and beyond. Businesses can then relax and concentrate on more immediate matters in hand.
Squaring the circle, inside a four dimensional cube, may seem more plausible, than a trade deal with the EU. A deal which will meet the conflicting ambitions of the Tory Party and the disparate objectives of the 27 member states. A transition offering Free Trade, inside the customs union which is not actually access to the single market inside a tariff wrapper, is the presentation pack to the back benches.
Good luck with that. It is the silly season after all. The vision for transition would include a "back to the future" option, predating June 2016. As Phillip Hammond explained driving a train (and tardis presumably) is so easy even a woman can do it. Yep, and it's cheaper as the BBC demonstrates ...
That's all for this week. Have a great week-end ... Don't Miss the Economics Conference on the 13th October. Our theme is the Economics of Greater Manchester. We will be talking about the Inclusive Growth Challenge, Balancing the Books and the Sectors Driving Growth in the City Region! Another Great Conference in the pro-manchester series ... Book Now Don't Miss Out ...
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The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.