Graeme Wearden 

UK GDP: economy stagnates as Brexit uncertainty hits growth – as it happened

UK economy failed to grow over the August-October period, reports the Office for National Statistics in its latest growth report
  
  

The view from 125 Deansgate in Manchester
The view from 125 Deansgate in Manchester Photograph: Mark Waugh/Alamy Stock Photo

Summary

Time for a recap

Britain’s economy has been dragged back into stagnation by economic uncertainty.

GDP was unchanged in October, after shrinking in August and September. New ONS data showed that construction output slumped during the month.

The economy was also flat over the last quarter, with service sector growth slowing and manufacturing declining again.

Economists blamed the ongoing Brexit crisis, and the slowdown in the global economy.

UK GDP

Britain’s trade in goods deficit also jumped, as imports from both within and outside the EU rose faster than exports.

But the pound has risen, touching a new seven-month high against the US dollar, as traders brace for Thursday’s election.

Markets have fallen in Europe and the US, as trade war fears bubble. But some losses have been recouped after the WSJ reported that the next deadline could be delayed.

It’s also been a busy day for banking news:

And a gloomy day in UK retail:

WSJ: Next US tariffs on China could be delayed

Trade war news: The Wall Street Journal is reporting that US and Chinese negotiators are preparing for the next tranche of tariffs, due on 15 December, to be delayed.

That would allow both sides more breathing room to work on the Phase One trade deal that has apparently been nearly finished for weeks.

The Wall Street Journal has the story:

U.S. and Chinese trade negotiators are laying the groundwork for a delay of a fresh round of tariffs set to kick in on Dec. 15, according to officials on both sides, as they continue to haggle over how to get Beijing to commit to massive purchases of U.S. farm products President Trump is insisting on for a near-term deal.

In recent days, officials in both Beijing and Washington have signaled that Sunday is not the final date for reaching a so-called phase-one deal—even though that is the date President Trump has set for tariffs to increase on $165 billion of Chinese goods. That date could be extended, as has happened several times when the two sides thought they were on the verge of a deal. Those prior deals, though, never held and tariffs continued to mount.

Chinese and U.S. officials involved in the talks say they don’t have a hard deadline.

This report is lifting European stock markets off their earlier lows. The FTSE 1000 is now down just 41 points, having shed over 80 points earlier today.

Wall Street has opened slightly in the red, but not as bad as expected. The Dow has lost 30 points, or 0.1%, to 27,878.

The economic picture looks a little brighter in Germany today.

The ZEW German Economic Sentiment index has hit a 21-month high, showing that investors in Europe’s largest economy are more upbeat.

Those interviewed said they were more optimistic about future expectations, and that current conditions had improved.

Paul Dales of Capital Economics fears the UK economy is going nowhere in the current quarter, given today’s weak GDP report.

He told clients:

The 0.2% m/m rise in services output shows that the largest part of the economy hasn’t got much momentum and the 0.2% m/m gain in manufacturing output may not be repeated given the weak global backdrop.

What’s more, this is despite the first real evidence that stockbuilding ahead of the old 31st October Brexit deadline may have provided some support to the economy. Indeed, most of the sharp leap in the international trade deficit, from £1.9bn in September to £5.2bn in October <see here>, was due to businesses buying more components from overseas as imports rose by a strong 6.2% m/m

Updated

The weak growth figures haven’t caused much of a kerfuffle in the City.

The pound has hit a new seven-month high against the US dollar today, touching $1.3189, as investors continue to price in a Conservative election victory.

Weak consumer confidence means Christmas puddings and tins of biscuits are languishing on UK shop shelves.....

Full story: Economy flatlines as election looms

Here’s my colleague Phillip Inman on the UK’s stagnating economy:

Britain’s economy stalled in the three months to October following steep falls in the manufacturing and construction industries, according to the last official economic data before voters head to the polls on Thursday.

The Office for National Statistics said its monthly assessment found that a broad swathe of the UK’s industrial sectors struggled in the autumn months to leave GDP growth at zero.

Only the services sector showed signs of growth and the ONS emphasised that the areas where activity was still modestly higher were in estate agencies, the health sector and professional, scientific and technical activities.

Highlighting the weakness of the economy, year-on-year growth in GDP slowed to 0.7% in October, which was the lowest rate of growth since March 2012...

Wetherspoons plans 10,000 extra jobs

The slowdown in the UK economy isn’t deterring Wetherspoons from expanding.

The pub chain has announced it will create 10,000 new jobs in the next four years, as it spends £200m expanding and improving its estate. This will include new pubs in Bourne, Waterford, Hamilton, Ely, Diss, Felixstowe, Newport Pagnell and Prestatyn.

Founder Tim Martin, a Brexit suppporter, says

“We are especially pleased that a large proportion of the investment will be in smaller towns and cities which have seen a decline in investment in recent years.

Updated

Geoff Tily of the TUC says today’s GDP report shows “the economy is in trouble...after a decade of Tory cuts”.

He writes:

The news that the economy has ground to a halt, comes on top of earlier information showing annual GDP growth at a ten-year low and the UK languishing at the very bottom of the rich country league table.

That’s the legacy of a decade of Conservative cuts and mismanagement.

He also points out that Britain’s recovery since the global financial crisis has been the slowest for more than a century.

More here.

Here’s some political reaction to the GDP figures, from Liberal Democrat Chuka Umunna:

UK trade in goods deficit widens

Britain’s trade in goods deficit has widened too -- as imports continue to grow faster than exports.

The goods deficit with the EU has widened by £3.5bn to £25.0bn in the last three months, while with non-EU countries it widened £3.3bn to £10.6bn.

The ONS explains:

Imports from non-EU countries rose by £5.3 billion to £61.0 billion in the three months to October 2019. This was largely driven by a £3.9 billion increase in unspecified goods (which includes non-monetary gold), and a £1.1 billion increase in machinery and transport equipment.

Imports from EU countries rose by £4.7 billion to £68.2 billion in the three months to October 2019. This was largely driven by machinery and transport equipment, and chemicals, which increased by £2.2 billion and £1.3 billion respectively.

Overall, the trade in goods deficit widened £6.8bn to £35.6bn in August-October, largely driven by rising imports; the trade in services surplus widened £4.4bn to £28.4bn, largely driven by rising exports.

Jack Leslie, Economic Analyst at the Resolution Foundation, says the next government must do more to boost growth:

“Crucially the UK’s domestic challenges come against a weak global economic outlook for next year.

While the main parties have avoided any discussion of this challenging economic environment during the election campaign, navigating it will be a central task for the next government nonetheless.”

While monthly GDP data can be volatile, the big picture is that the UK economy is growing at its weakest pace since the aftermath of the last recession.

Updated

Deloitte: Brexit uncertainties blight growth

Today’s GDP report is the first since Britain officially avoided recession, by posting growth in the third quarter of 2019.

Debapratim De, UK economist at Deloitte, says Brexit worries are holding the economy back:

“Today’s data suggest that the UK economy is struggling to gain momentum after avoiding a recession in the third quarter.

The sharp contraction in construction activity is a reminder that the global slowdown and Brexit uncertainties continue to blight UK growth.”

Britain’s builders have suffered a mensis horribilis.

Construction output slumped by 2.3% in October alone, a serious slide, which took output down to its lowest level since January 2018. That’s partly due to drop in housebuilding and home repairs.

The ONS says:

Rolling three-month growth in construction was negative 0.3% in the three months to October 2019. This fall was driven by private housing repair and maintenance, and private new housing, which fell by 3.6% and 1.0%, respectively.

The month-on-month growth in October was negative 2.3%. This decrease was driven by private new housing and infrastructure, which fell by 4.7% and 4.3%, respectively. The fall in infrastructure is as a result of several large businesses changing the timing of some of their regular activity from July to October.

John Hawksworth, chief economist at PwC, says Britain’s economy is suffering from Brexit uncertainty - and the slowdown in the world economy.

“GDP was flat in both October alone and the three months to October, confirming a loss of momentum in the economy since the summer due to Brexit-related uncertainty and slower global growth.

The sectoral breakdown showed a familiar pattern, with services growth modestly positive in the three months to October but manufacturing output declining. Construction output also registered a particularly sharp drop in October as both infrastructure projects and housebuilding fell back.

Growth seems likely to remain subdued through the rest of 2019, but we would hope for a gradual revival in activity over the course of 2020 if current political and economic uncertainties ease. Our main scenario is for 1% GDP growth in 2020 assuming an orderly Brexit.”

NIESR, the economic think tank, says the UK economy is now suffering from falling investment -- which has been under pressure since the Brexit vote.

UK GDP

GDP: Instant reaction

This chart from Economist Rupert Seggins shows how Britain’s manufacturing, construction and ‘admin and services’ all contracted in the last three months:

Ed Conway of Sky says it’s not an encouraging picture:

Dharshini David of the BBC points out the service sector prevented the economy from contracting:

Today’s GDP report shows the UK economy failed to grow in August, September or October.

The government once boasted about creating a March of the Makers.

Today’s GDP report paints a different picture: output at UK manufacturers has been falling pretty steadily since the spring, as the boost from Brexit stockpiling has faded.

Growth across Britain’s services sector, which makes up around three-quarters of the economy, has also stumbled.

The ONS says:

Growth in the services sector slowed in the three months to October 2019 to 0.2%, following growth of 0.4% in the three months to September 2019.

This growth was driven by strength in professional, scientific and technical activities, wholesale trade and health, and was partially offset by weakness in office administrative and support activities.

Britain’s factories and builders have both suffered falling growth in the last quarter, today’s report shows.

An ONS spokesperson said:

“The UK economy saw no growth in the latest three months. There were increases across the services sector, offset by falls in manufacturing with factories continuing the weak performance seen since April.

Construction also declined across the last three months with a notable drop in house building and infrastructure in October.”

UK economy stagnates

BREAKING: The UK economy has stagnated in October, and also over the last quarter.

That’s according to the latest monthly growth report from the Office for National Statistics. It shows that GDP was unchanged during October itself, and also in August-October compared to the previous three months.

On an annual basis, the economy only grew by 0.7% over the last year -- the weakest since March 2012, the ONS says.

More to follow!

It’s nearly time for UK GDP...

Ted baker shares slump

Oof! Shares in fashion retailer Ted Baker are being hammered, down 35% at one stage this morning.

The City is alarmed by this morning sudden departure of both CEO Lindsay Page (a company veteran) and chairman David Bernstein. The news that pre-tax profits might dwindle to just £5m, from £50m last year, is another hefty blow.

Retail analyst Nick Bubb says today’s trading update is “dreadful”:

Well, after yet another profit warning, it will cost a lot less to buy Ted Baker now and take it private, but Ray Kelvin could be forgiven for having second thoughts, given the mess the business is in.

Kelvin, the firm’s founder, was ousted after staff reported they were forced to hug him, sit on his knee or let him kiss their ears.

The London stock market has started the day on the wrong foot, as investors await October’s UK GDP report.

The blue-chip FTSE 100 index has shed 65 points, or 0.85%, in early trading to 7,173 - back towards last week’s two-month lows.

The smaller FTSE 250 index is also weaker, down 0.7%.

Other European indices are also in the red, amid anxiety over the US-China trade war. Unless there’s a breakthrough soon, America could impose fresh tariffs on Sunday.

With the UK’s future as murky as the clouds blanketing the country, people appear to be delaying their Christmas preparations.

New figures show that Britain’s big four supermarkets all suffered a drop in sales over the last 12 weeks, suggesting consumers are being cautious. This boosted Germany’s discounters, with Aldi and Lidl growing their market share to 14.1%, according to researchers at Kantar.

Overall, sales growth slowed to just 0.5% over the last three months.

Kantar says:

“Amid the uncertainty of a (Dec. 12) general election, a lacklustre Black Friday and a wet autumn, shoppers have been delaying their Christmas preparations and are waiting to stock up on festive supplies.”

Introduction: UK GDP for October

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Today we get the final healthcheck on the UK economy before Thursday’s election, and it may not cheer the spirits.

Economist predict that growth was stagnant over the last three months, as political and economic uncertainty hurt business investment and consumer confidence.

The City predicts that GDP crept up by 0.1% in October alone - a month dominated by Boris Johnson’s failed attempts to rush his Brexit deal though parliament. But GDP has previously declined by 0.1% in both August and September,

Recent economic data has shown that Britain’s service sector was flat in October, while both construction and manufacturing output fell. Only a burst of growth in July helped the UK to avoid a full-blown recession over the summer.

A weak GDP report could cause some late drama in the UK election campaign. The City is still anticipating a Conservative victory, keeping the pound near a 31-month high against the euro at €1.188 this morning.

But there’s also edginess that the result could be closer than many opinion polls are expecting...

Also coming up today

The crisis at troubled fashion retailer Ted Baker has deepened this morning. The firm has slashed its profit forecasts, frozen its dividend and announced the immediate departure of its chairman and CEO.

Worryingly, it also warns investors that:

“Trading over November and the Black Friday period was below expectations, with lower than anticipated margins and sell through.

This kitchen-sinking comes nine months after founder Ray Kelvin was forced out over allegation of inappropriate behaviour.

Troubled German financial giant Deutsche Bank is holding a strategy day, where CEO Christian Sewing will be outlining plans to turn the firm around

The agenda

  • 9.30am GMT: UK GDP for October: expected to rise 0.1% month-on-month
  • 9.30am GMT: UK balance of trade for October: £11.65bn deficit expected, up from £12.54bn
  • 9.30am GMT: UK manufacturing production for October: no growth expected, up from -0.4%
  • 3.50pm GMT: IMF chief Kristalina Georgieva is speaking in Washington

Updated

 

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