Economy slows as exports fail to capitalise on weak pound
THE economy is slowing down again, new estimates warn, as exports fail to live up to hopes that the weak pound would boost overseas sales.
Growth slowed to 0.2pc in the three months to July, the National Institute of Economic and Social Research (Niesr) believes, down from 0.3pc in the quarter to June.
“The service sector, which was the main driver for economic growth in the second quarter, appears to have slowed,” said Amit Kara, Niesr’s head of UK macroeconomic forecasting.
“We see a modest recovery in the second half of this year in response to strengthening global growth and a weaker currency, but on the flip side, consumer spending is likely to be weighed down by weak wage growth and investment spending held back by Brexit-related uncertainty.” It came as data from the Office for National Statistics yesterday showed exports fell in June while Britain’s manufacturing output stayed flat on the month.
Analysts had anticipated something of a recovery in June, setting the UK economy up for a stronger second half.
But the trade deficit widened to £4.6bn in June, defying predictions that it would fall to £2.5bn. That is the biggest monthly deficit of the year. For the second quarter overall the deficit hit £8.9bn. Business surveys have indicated firms are experiencing a substantial rise in demand from overseas, with the weak pound making British goods more competitive. Stronger growth in the world economy was also predicted to boost exports. But that has not yet shown through.
Construction output also fell by 0.1pc on the month and 1.3pc on the quarter, against a backdrop of weakness in the housing market.