From the BBC
10th May 2019
The UK economy picked up in the first three months of the year after manufacturers' stockpiling ahead of Brexit helped to boost growth. Growth was 0.5% in the quarter, up from 0.2% in the previous three months, the Office for National Statistics said. The manufacturing sector grew at its fastest rate since 1988 in the period. The ONS said this was driven by manufacturers rushing to deliver orders before the original Brexit deadline of 29 March. Pharmaceuticals was one of the sectors most affected, expanding 9.4% between January and March. Previous business surveys had shown manufacturers stockpiling goods for Brexit in case the UK left the EU without a transition deal, which they feared could lead to delays at UK borders.
As well as manufacturers rushing to deliver orders before the UK was due to leave the EU, firms also stockpiled parts. This drove a surge in imports, with the total trade deficit - the gap between what the UK imports and exports - doubling in the first quarter to a record high, separate data from the ONS showed. The total trade deficit widened from £8.9bn to £18.3bn, driven partly by a sharp increase in imports of cars and gold [£6Bn worth!]. However, the UK's deadline to exit the EU has since been extended until the end of October after Prime Minister Theresa May asked the EU for more time to negotiate a deal.
Chancellor Philip Hammond said the figures showed the economy remained "robust". "These GDP figures this morning show again that the UK economy is performing robustly, despite the evidence of slowing global growth and the continued Brexit uncertainty at home - so it's good news," he told the BBC. But analysts have warned the impact of Brexit could mean the pick-up in growth is short-lived. Tej Parikh, senior economist at business lobby group the Institute of Directors, said it could well be just "a flash in the pan". "Some businesses brought activity forward early this year in preparation for leaving the EU, so higher stocks and earlier orders have artificially bumped up the growth numbers. In the second quarter, many firms will be keen to run down their Brexit caches, which will drag on economic growth," he said. But Ruth Gregory, senior UK Economist at Capital Economics, said the figures offered some "encouraging signs that underlying growth gained some pace". She said household consumption growth was "solid" and pointed out that business investment grew "for the first time in four quarters".
[Stories like this are one reason why I don’t trust the pronouncements of Economists or Chancellors. It’s clear that the so-called ‘boost’ in the economy is from companies stockpiling like crazy because of their fears regarding a no-deal Brexit and getting out as many orders as possible to both avoid any increased tariffs and to get a war chest ready to tide them over any expected issues post-Brexit. This is not simply companies ‘doing well’ despite all of the doom and gloom from Project Fear. Likewise household consumption – hardly something to rely on – is probably people stockpiling (again) plus making purchases now in the expectation that prices will inevitably rise once we leave the single market. The sudden import in gold to the tune of SIX BILLION POUNDS in THREE MONTHS says it all really. People are hunkering down in anticipation of the hard times ahead. This is hardly the sign of an economy ‘doing well’.]
3 comments:
Weird things happen when economics are concerned. I guess that book Freakenonomics covered a lot of it. As economists go I tend to like what Paul Krugman has to say.
I would not trust those statistics either. In my country our President is always rolling out stats about how great the economy is doing and we KNOW all he does is lie.
@ Brian: Despite my growing interest in Economics I have yet to read Krugman. I do hear his name a lot though.
@ Judy: I'm convinced that Economists really don't understand how Economics actually works. Plus Governments lie. Some more than others but it's all on a scale.
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