Red-hot July ends UK recession fears

Brexit stockpiling also helped boost failing economy

BRITAIN has avoided recession as third quarter gross domestic product (GDP) grew by 0.4 per cent, the Office for National Statistics is expected to say tomorrow.

A recession officially occurs when an economy has shrunk over two consecutive quarters. UK GDP shrank by 0.2 per cent in the second quarter and there were fears Britain would sink into recession for the first time since 2008 due to a series of weak results from economic indicators throughout the third quarter.

However economists expect the ONS to say the third quarter saw a return to growth, driven primarily by a strong performance in July and some stockpiling in September ahead of the then Brexit deadline of October 31.

They add that even though Britain is likely to have avoided recession, the economy is still treading water. Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “The UK economy likely returned to clear growth in the third quarter with GDP growth of 0.4 per cent quarter-on-quarter.

“However this will overstate the underlying strength of the economy and was highly dependent on a spike in activity in July. Activity eased back in August and the economy seemed to have a difficult September, thereby carrying little momentum into the fourth quarter.”

Pantheon Macroeconomics chief UK economist Samuel Tombs agreed: “GDP was driven by July and it does not provide a very good springboard for growth in the fourth quarter. There is still a lot of uncertainty.” He added: “The main uncertainty is whether the economy saw a boost from stockpiling like it did in the first quarter. There was a little boost to industrial production in September.”

The following day, the ONS is tipped to say the jobs market is slowing, with the number in work falling by 90,000 over the three months to the end of September. It would be the second consecutive fall, the previous period saw the workforce shed 56,000. However the unemployment rate is expected to stay at 3.9 per cent. Average earnings growth for September is also expected flat at 3.8 per cent.

On Wednesday inflation, as measured by the consumer price index, is likely to come in at 1.6 per cent, a level last seen in December 2016.

Investec chief economist Philip Shaw said: “We think inflation tracked down in October and the main reason is the cap on gas and electrical prices introduced by Ofgem. The other things to look out for are lower petrol prices and discounting in retail. Put it all together and you have falling inflation.”