Britain’s growth appears to have slowed. Industrial production stagnated in August, and manufacturing output rose by just 0.1% on the month. Meanwhile, manufacturing sector activity slid to a one-year low in September, according to the closely watched PMI survey.
Car sales, however, registered their best September in a decade, while the International Monetary Fund reckons the UK will enjoy 3.25% annual GDP growth this year, the fastest pace of the world’s top economies.
What the commentators said
Yes, some recent surveys have been weak, but it’s too soon to worry about the recovery running out of steam, said Capital Economics. The weakness has been largely confined to manufacturing, and it’s not as bad as it seems.
The PMI survey grabbed headlines, but it’s not a good leading indicator. Other surveys, such as the Confederation of British Industry’s trends analysis, point to annual manufacturing growth of 2%-4%.
While the strength of sterling and the faltering eurozone are hurting exports, domestic demand “should be able to support moderate growth in manufacturing output over the next year or so”.
There is certainly much momentum in the corporate sector, said Allister Heath in The Daily Telegraph. Despite widespread talk that firms aren’t spending, they’re in fact “splashing out”. Business investment in the second quarter was 14.7% above the first three months of 2008, according to Citigroup. Corporate spending is rising at 11% a year, the fastest rate since 2007.
Consumers are in solid shape too, as Businessweek’s Fergal O’ Brien and Andrew Atkinson pointed out. In the second quarter, wages rose by 1.9% –faster than inflation – so the squeeze on real earnings is fading. There should, concluded Capital Economics, be enough momentum for the economy to manage “another year or two of solid growth”.