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

Graeme Wearden

from on 2020-02-11 16:57 (#4Z6H8)

UK economy flatlined in October-December, with service sector growth weak and manufacturing shrinking. But things may be picking up....

Summary: UK economy didn't grow in the last quarter
BREAKING: GDP unchanged in the last quarter
ONS: Brexit caused volatility in 2019
Manufacturing shrank; services struggled; business investment fell
But UK doing better than France or Italy
Green shoots in December, after grim November

4.57pm GMT

Finally, the UK's FTSE 100 has closed 52 points higher or 0.7% at 7499.

Traders shrugged off today's GDP report, as the City joined a wider global rally triggered by signs that the coronavirus infection rate may be slowing.

4.55pm GMT

America's stock market hit a fresh record high today, amid general optimism that the coronavirus crisis could be easing.

It's now dipped back -- and president Trump knows who to blame:

New Stock Market RECORD. Congratulations, spend your money wisely. KEEP AMERICA GREAT!!!!!

When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports.

4.05pm GMT

Mark Carney also told the House of Lords that more public and corporate investment are needed, to lift growth.

It's a timely intervention, given today's weak GDP report and the decision to press on with the high-speed HS2 rail project.

"This is an environment in which, yes, the right infrastructure, the right corporate investment projects make sense and will be necessary in order to ultimately get us out of this situation."

4.01pm GMT

Outgoing Bank of England chief Mark Carney is now weighing in too.

Speaking at the House of Lords, Carney says UK interest rates are likely to be relatively low for the foreseeable future (they're currently just 0.75%, with two policymakers pushing for a cut this month).

3.50pm GMT

GDP is always a blunt instrument, and the New Economics Foundation fears that today's growth report doesn't capture the damage to living standards since the financial crisis.

NEF, a think tank, has calculated that the UK population are still 97 poorer on average compared to the first three months of 2008.

"The current debate on the economy and Brexit is at risk of missing the wood for the trees - whatever the nature of tomorrow's trade deals, the far bigger issue is that the economy is failing the majority of people today.

"The current political turmoil has distrust in technocracy and 'expert' views at its core. Matters won't be helped if too much attention is given to where the next recession is going to come from, when the average person has yet to even recover from the last one."

Whatever the nature of tomorrow's Brexit uncertainties, the bigger issue is the economy is failing the majority of people *today*, & has been for over a decade

New @NEF analysis shows living standards are still lower today than at the beginning of 2008https://t.co/rzajbeM4XE pic.twitter.com/wMiUCIJx5S

3.49pm GMT

Another central banker, Federal Reserve Chairman Jerome Powell, has warned politicians that the coronavirus is a key threat to the global economy.

Testifying to Congress, Powell says:

"In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy."

Why cannot someone ask: if all is good and repo functioned well according to #powell, WHY DO WE STILL NEED IT till April? so simple, 6 words...

3.10pm GMT

Here's our updated news story on the UK GDP figures:

2.18pm GMT

Meanwhile in Strasbourg, the head of the European Central Bank has warned that the eurozone has been slowing for two years!

Christine Lagarde told the European Parliament:

Euro area growth momentum has been slowing down since the start of 2018, largely on account of global uncertainties and weaker international trade.

Moderating growth has also weakened pressure on prices, and inflation remains some distance below our medium-term aim.

Monetary policy cannot, and should not, be the only game in town....

1.38pm GMT

Time for a recap

Britain's economy stagnated in the final quarter of 2019, as political uncertainty, Brexit worries, a slowing eurozone and trade tensions all hurt growth.

"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.

Eurozone GDP was up 0.1% q/q in Q4. Spain grew 0.5% q/q, France contracted 0.3% q/q as hit by strikes. Germany has not yet released a q/q figure for Q4

1.00pm GMT

Chancellor Sajid Javid has managed to respond to today's GDP figures, without actually mentioning the GDP figures!

"We've broken the deadlock and left the EU - now we need to seize this moment to level up and prepare our great nation for long-term success.

"In my Budget, exactly one month from today, I'll set out how we will move forward, with more ambition and new thinking, and empower our people and businesses so everyone has the opportunity to thrive."

12.47pm GMT

And over in parliament, Boris Johnson has just confirmed that the HS2 rail project will go ahead.

The PM is arguing that the UK needs increased capacity and faster speeds, despite concerns over the cost of the high speed line from London to Birmingham, and then the north.

12.42pm GMT

Meanwhile in the City, shares in holiday firm TUI are now up 11% after reporting record booking levels - thanks to the demise of rival Thomas Cook.

Tui enjoys record bookings in wake of Thomas Cook collapse https://t.co/Fq5Br6xurj

12.25pm GMT

Professor Costas Milas of Liverpool University reckons there are three reasons to suggest that the UK economy will remain on shaky ground.

First, the carry over effects of today's no GDP growth will undermine future UK growth.

Second, the rising headwinds of the new Coronavirus will hit, to some extent, global growth and, consequently, undermine further the prospects of future UK growth.

As Liverpool colleagues and I have shown, additional monetary stimulus can mitigate the impact of zero UK growth and the uncertain global environment. In other words, I think it is quite likely that the Bank of England will intervene by cutting its policy rate as early as March the 26th when its next interest rate decision is scheduled.

11.58am GMT

Today's growth report isn't as bad as some economists feared, points out our economics editor Larry Elliott.

But while things may improve in 2020, there's little hope of the UK economy racing ahead.

Surveys have suggested that some of the [business] investment that had been on hold has now been sanctioned. The "phase one" trade deal agreed between Washington and Beijing has removed the threat of intensifying protectionism.

Wages are rising faster than prices, which should support consumer spending. And the UK chancellor, Sajid Javid, is poised to deliver an expansionary budget next month.

UK economy can bounce back - but don't expect boom-boom Britain | Larry Elliott https://t.co/fyzhj305B4

11.32am GMT

John Springford of the Centre for European Reform predicts a growth-friendly budget next month:

Poor GDP figs for Q4 2019. But Javid will raise government spending this year, in turn boosting GDP. While Trump's trade wars have been costly, his 2018-19 stimulus has kept headline GDP and employment humming along. Expect the same in the UK.

11.31am GMT

Here's CBI deputy director Josh Hardie on today's GDP report:

UK GDP: British economy stagnates as Brexit uncertainty hits growth

Of course disappointing but opportunity remains: there is evidence of improved biz confidence. Clear, bold policy can help turn this into investment. HS2 helps - more needed. https://t.co/NE7xFkWCOv

11.30am GMT

Ruth Gregory of Capital Economics says today's GDP figures were not quite as bad, and may show the UK outperformed the eurozone last year.

The stagnation in GDP in the fourth quarter beat our forecast of a 0.1% q/q fall.

Encouragingly, overall household consumption managed to eek out a small rise of 0.1% q/q, suggesting that growth in spending off the high street compensated for the 0.9% quarterly fall in retail sales. Meanwhile, Q3's quarterly GDP estimate was revised up from 0.4% to 0.5% q/q.

11.15am GMT

Here's a chart showing how UK manufacturing has fared in the last six months.

10.55am GMT

Tej Parikh, chief economist at the Institute of Directors, says the UK economy ended 2019 in "a funk", with stagnation in Q4.

It needs some assistance from Chancellor Sajid Javid in March's budget, he says:

It's likely that political uncertainty and unwinding stockpiles caused the economy to flag at the end of last year. However, firms entered 2020 with more of a spring in their step. Confidence has shot up, while hiring plans and investment intentions have also risen a notch, but the post-election bounce may tail off.

"Uncertainty from the next stage of Brexit negotiations will increasingly play on the minds of business leaders. Meanwhile, ongoing hiccups in global growth, including the fallout from Coronavirus, could eat into the economy if global financial markets and trade slow.

"The UK economy lost momentum in the final quarter of 2019 due to weaker figures for industrial production.

"UK manufacturing remains a weak point for the UK economy with sluggish global demand, tightening cashflow and disrupted supply chains dragging on activity in the sector.

10.51am GMT

Jack Leslie, Economist at the Resolution Foundation, is disappointed that UK GDP in Q4 2019 was only 1.1% higher than Q4 2018 (according to the ONS today).

"The UK economy ended the 2010s on a low, with the joint weakest annual economic growth of the decade. This slowdown is widespread too - manufacturing is in recession and the services sector grew at its slowest rate since mid-2016.

New @ONS GDP figures for the final quarter of 2019 show that GDP growth in Q4 was flat and 1.1 per cent over the year as a whole - equalling the weak economic growth since the first quarter of 2010. Here's the response from RF Economist @jackhleslie (charts to follow soon): pic.twitter.com/cTu9GDd0Yz

10.32am GMT

The UK economy actually did better than some rivals, despite stagnating in the last quarter.

We don't have all the GDP reports for Q4 yet, but as things stand we know that America and Spain did OK while France and Italy shrank. China was the standout performer, even though annual growth dropped to a 30-year low.

The latest UK GDP figures in context. Growth between Q4 2018 and Q4 2019:
US +2.3%
Canada +1.7% (Q3)
Japan +1.7% (Q3)
UK +1.1%
Eurozone +1%
France +0.8%
Germany 0.5% (Q3)
Italy 0.0%

10.15am GMT

The British economy failed to grow in the final three months of last year, as political uncertainty took its toll on businesses, writes my colleague Richard Partington:

The Office for National Statistics said that growth in gross domestic product (GDP) flatlined between October and the end of December, down from 0.5% growth in the third quarter.

The latest snapshot shows the economy returned to its weak trajectory in the run-up to Christmas, with paralysis in Westminster followed by a general election campaign that ended in a large majority for Boris Johnson.

UK GDP: British economy stalls amid political uncertainty https://t.co/qj5QKbHcCw

10.14am GMT

John McDonnell MP, Labour's Shadow Chancellor, is appalled by the poor performance of UK industry this year.

He says:

"These are damning figures showing an economy punctured by a decade of decline.

"With production tumbling over 2019 at its worst rate since 2012, it is clear that the Tories' combination of cruel cuts and economic mismanagement has sent the economy into freefall.

10.10am GMT

You can read the fourth-quarter UK GDP report here:

December's report is online here.

10.08am GMT

Disappointingly, business investment fell by 1% in the final quarter of 2019.

The ONS blamed "heightened uncertainty" (yes, our old 'friend' Brexit again...):

Gross fixed capital formation (GFCF) fell by 1.6% in the fourth quarter of 2019. The fall was driven by declines in investment in information and communication technology (ICT) equipment, dwellings, transport, and intellectual property products, though these were partially offset by an increase in investment in other buildings and structures.

Business investment fell by 1.0% in the final quarter of the year, continuing its recent subdued performance as heightened uncertainty is likely to have weighed on the willingness of firms to invest in capital.

10.04am GMT

Boris Johnson's (broken) pledge to leave the EU on 31 October 'do or die' hurt UK manufacturing, today's GDP report shows.

Some car factories paused work in November in case Britain had crashed out of the EU on 31 October without a deal. By the time the delay came, it was too late to change plans.

Output in the manufacturing sector fell by 1.1% in the most recent quarter, driven by a decrease in the manufacture of transport equipment, with several factories going ahead with planned shutdowns in November

9.58am GMT

It's not all doom and gloom.

UK growth in the third quarter of 2019 has been revised up to show 0.5% growth, from 0.4%.

Good News! Due to an upwards revision for the 3rd quarter to 0.5% UK annual GDP growth was 1.1% at the end of 2019

9.54am GMT

At the risk of aping Norman Lamont, there are some small green shoots of recovery peeking out of today's UK GDP report.

Services, manufacturing and construction did all manage some growth in December. That helped to grow the economy by 0.3%, after a torrid November in which services and manufacturing both shrank.

9.50am GMT

Here's some instant reaction to the UK economy's failure to grow in the final quarter of 2019, despite a pick-up in December:

UK GDP was flat in Q4. 2019 was a difficult year for the British economy due to #Brexit uncertainties but the UK is definitely not in a crisis!

Post-election soft indicators suggest stronger growth momentum in early 2020 - will it last with still elevated Brexit uncertainties? pic.twitter.com/AYWSKonx7A

UK GDP flat in Q4 (0.0% QoQ, 1.1% YoY) but tentative signs of a post-election rebound in Dec data. At 1.1% YoY, growth remains weak by historic standards & < median G20 level (after ticking above in H1 19). Survey-based data suggests better Q1 20 growth, but certainly not assured pic.twitter.com/oGyFmwFAWT

Compared with the same quarter a year ago, UK GDP increased by 1.1% to Quarter 4 2019; down from a revised 1.2% in the previous period. Much in line with Eurozone .

Actually if you look beneath the surface there's some good news buried in what looks like a slightly depressing GDP report today. Growth upgraded in Q2 and Q3. And (at the risk of being pedantic) while GDP growth was 0.0% in Q4, it was actually ever so slightly positive

9.45am GMT

Brexit uncertainty is to blame for Britain's volatile (and mediocre!) growth in 2019.

So says the Office for National Statistics in today's December growth report (which also gives a picture of the whole year).

The volatility in 2019 can be seen to some extent in all headline sectors, but most notably in production and construction. However, while construction data can often be volatile, the recent volatility in the production sector has been notable, coinciding with the UK's two previously planned departure dates from the EU.

Despite this, the underlying picture for production was one of weakening throughout 2019, with nine months of the year showing negative rolling three-month growths.

9.42am GMT

During 2019, the UK economy grew by 1.4% - up from 1.3% in 2018.

That's two years of rather weak, sub-trend, growth.

9.37am GMT

Here's the ONS's Head of GDP, Rob Kent-Smith, on Britain's flatlining economy:

"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.

"The underlying trade deficit widened, as exports of services fell, partially offset by a fall in goods imports."

9.36am GMT

Britain's service sector grew by a paltry 0.1% in the final quarter of 2019, today's GDP report shows.

But manufacturing did badly again -- slumping by 1.1% in October-December. The broader measure of industrial production shrank by 0.8%.

9.31am GMT

Newsflash: The UK economy stagnated in the final quarter of 2019, with no growth at all.

But in December alone it grew by 0.3%, reversing its slump in November, according to the Office for National Statistics.

9.27am GMT

Stand By Your Desks! UK GDP is up soon and it will be tight as it will be close to 0. The pattern has been for weaker numbers ( November was -0.3%) to be revised up so fingers crossed! #GBP

9.25am GMT

Just five minutes to go until we learn whether Britain ended 2019 with a bang or a whimper....

9.17am GMT

City economists reckon UK GDP may have risen 0.2% in December - but that wouldn't make up for November's 0.3% slide....

Heads Up: GBP Monthly GDP (MoM) (DEC) due at 09:30 GMT (15min),
Actual: N/A
Expected: 0.2%
Previous: -0.3%https://t.co/6c3bvNTuie

8.54am GMT

Here's Paul Donovan of UBS Wealth Management on today's UK GDP report (due in 35 minutes):

Investment spending is likely to be negative, driven down by the uncertainties caused by US President Trump's trade taxes and the interminable EU-UK divorce.

8.31am GMT

Online grocer Ocado has today confirmed what you may already have suspected -- a major warehouse fire is rather bad news for profits.

"Ocado has delivered decent revenue growth and a range of new partnerships in the last 12 months, but its loss for the year is well beyond analyst expectations. While the impact of the Andover facility fire will account for some of this, the scale of the loss may have some market watchers concerned.

Looking underneath the cashflow figures the UK has turned positive, but investment in the international business has pushed the scale of cash outflow higher."

8.15am GMT

City traders appear to be hoping that central bankers will save the day (again) if the global economy stumbles:

European and US stock index futures storm higher as speculators shrug off coronavirus fears and continue to place all faith in central bank liquidity injections. #FTSE called up 50

8.11am GMT

Boom! European stock markets have hit a record high in early trading.

The Stoxx 600, which tracks the largest six hundred companies across Europe, has gained 0.6% at the open to a new peak.

The coronavirus' death toll has topped 1,000 as the disease continues spreading, but the infection rate seems to have stabilised. #Stock markets around the world have turned up and the safe-haven US #dollar, Japanese #yen, and #Gold are all on the back foot.

7.57am GMT

Overnight, we've seen that UK retailers aren't enjoying this alleged 'Boris Bounce'.

The latest data from the British Retail Consortium shows that spending only rose modestly in January, and actually shrank over the last three months.

The monthly BRC/KPMG health check of the retail sector found that total sales rose by 0.4% in January but were unchanged once increases in floor space were taken into account.

Over the latest three months - a better guide to the underlying trend because it includes Black Friday bargains in November, the peak Christmas spending weeks in December and the January sales - food and non-food takings were down.

7.43am GMT

Canaccord Genuity Wealth Management investment manager Dan Smith believes the UK economy could actually have shrunk over the last quarter [City consensus is for 0% growth]

"Considering December was a month plagued by political uncertainty and retail sales have already shown a more cautious consumer over the period, this figure looks challenging.

While a contraction in activity over the quarter will likely dampen sentiment towards the UK, it may not totally alter the outlook for 2020, as recent data has shown enough green shoots to raise hopes for a Boris bounce."

. Today's data could confirm an anemic growth in the four the quarter, and a stagnant industrial and manufacturing production in December. The fact that business surveys in January hinted at a bounce in activity posterior to Boris Johnson's victory may attenuate the impact of soft production and growth data.

But the optimism in surveys is now being eaten up as investors realize that the second - and the most decisive phase of Brexit negotiations will likely continue weighing on businesses. In fact, avoiding an immediate no-deal Brexit didn't necessarily save the UK from walking out of the EU without a deal at the very end.

7.01am GMT

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

Today we discover how well, or badly, the UK economy fared in the final three months of 2019 in the face of Brexit tensions, a general election, and a slowing European economy.

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