The UK economy flatlined in the last three months of 2019, as Brexit uncertainties and the general election weighed on consumer spending and business investment. According to data from the Office for National Statistics (ONS), economic growth was 0% between October and the end of December, down from 0.5% growth in the previous quarter.
“There was no growth in the last quarter of 2019 as increases in the services and construction sectors were offset by another poor showing from manufacturing, particularly the motor industry,” said the ONS’s head of GDP, Rob Kent-Smith.
Across the whole of 2019, GDP was estimated to have increased by 1.4%, slightly above the 1.3% growth seen of 2018, but below the average rate of around 2% in the previous five years. However, the data did contain signs of a post-election bounce. Economic growth reached 0.3% in the month of December – providing the first glimpse of how the economy performed after the general election on December 12. Howard Archer, chief economic adviser to the EY Item Club, said: “Business and consumer confidence have clearly improved early in the first quarter of 2020, and the overall impression is that this has led to some improvement in economic activity. However, with little hard data available so far, it is hard to judge just how much the economy is picking up and whether this can be sustained.”
On the same day, data from Eurostat showed that industrial production in the eurozone slumped by 2.1% in December, confirming earlier estimates of weak production in Germany, France and Italy. The news has dealt a blow to hopes for a recovery in the bloc this quarter, and comes amid heightened worries about the effect that the coronavirus outbreak will have on eurozone exports this year, particularly to China.
Back in the UK, there was an optimistic tone to the latest property report from the Royal Institution of Chartered Surveyors (RICS) this week. It said house prices rose at their fastest pace in almost three years in January. The RICS monthly house price index shot up to +17 in January from -2 in December, its best reading since May 2017. The solid performance was due largely to a change in sentiment in London and the South East, where a majority of surveyors said prices were rising for the first time since February 2016. Looking ahead, more surveyors expected prices to rise over the next year than at any time since 2016. And the number of properties put up for sale with agents rose at its fastest pace since August 2013 as buyers take advantage of the lifting mood.
That same optimism has not reached the high street, however. Like-for-like retail sales in January were flat compared with a year ago, down from annual growth of 1.8% recorded in January 2018. The data, from the British Retail Consortium (BRC), showed sales falling in the three months to January, exacerbated by a poor Christmas. Three-month total sales dropped by 0.6% - the worst performance since February 2017. Three-month non-food sales fell 1.3% on a like-for-like basis and total sales dropped 1.3%. Like-for-like sales strip out the distorting effects of sales from newly opened stores. Helen Dickinson, the BRC's chief executive, said: "Recent political uncertainty and a decade of austerity appear to have ingrained a more thrifty approach to shopping among consumers.”
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