Economy not battered, but it looks jaded under grey skies

Comment Martin Flanagan

Inflation is outpacing wages growth, pushing up the cost of living. Speculation about a measured or cliff-edge Brexit changes by the day, prompting many businesses to keep their powder dry on investment.

Many pundits believe an interest rate rise from the Bank of England is coming next month. Overall, as far as economic performance is concerned, 2017 has been as underwhelming – as was forecast in much of the City last year.

That surprise fourth quarter in 2016, when UK economic growth hit 0.7 per cent despite the shock Brexit vote nearly four months earlier, now seems a shaft of maverick sunlight before the clouds set in.

This year’s lacklustre performance, by contrast, is expected to continue next week, when economists expect official figures to show that GDP only expanded 0.3 per cent between July and September – in line with the previous flaccid two quarters.

Sterling’s fall since the Brexit vote has been a mixed blessing – any help to British exporters has been more than offset by a rise in input costs for a slew of British firms that have to import key raw materials.

Economists believe the latest data from the Office for National Statistics will mirror other surveys in the summer and autumn, highlighting an out-of-sorts services sector and a construction industry in technical recession.

The one bright spot may be a rise in industrial production, fuelled by a recently more buoyant manufacturing sector. Overall, then, next week’s GDP figures are likely to show the UK is not in any Brexitrelated tailspin, but that forecasts last year of malaise and uncertainty have proved accurate.

Against such a wan backcloth, some believe we should be grateful that Chancellor Philip Hammond yesterday received a welcome boost ahead of November’s Budget as figures showed an unexpected fall in government borrowing to its lowest level in a decade last month.

Sorry to be a jeremiah, but I’m not so sure. We look for government infrastructure spending to supply us with some economic firepower when the wider picture disappoints.

But, even when it comes, the infrastructure initiatives and tax changes always on analysis look to be a drop in the bucket.

Spreadsheet Phil has not been Father Christmas to date. Don’t hold your breath.