Key facts: Britain’s GDP grew 0.3% in July, after it shrank 0.1% in Q2. This means that the economy did not contract in the 3 – month period to July – end. This shows sign that a contraction of the economy in Q3 can be avoided, preventing recession.
What caused this?: During the second quarter, the UK economy shrank as a result of the stockpiling boom in preparation for the original Brexit deadline in March. However, in July, the UK’s services sector, which makes up 80% of the UK economy grew by 0.3%.
The bigger picture: In the three months to July, growth in GDP was flat – sparking fears that Britain could be heading for a recession. With growth in GDP in July, experts say it is unlikely that Britain will be heading for a recession.
The figures from July suggest that Britain’s economy is on track to grow. Careful reading of the figures would suggest that all is not rosy. Brexit continues to be a catalyst for uncertainty. The ONS has said that the “underlying picture shows services growth weakening through 2019”. However, some analysts have said that GDP should get a further boost in August because of the manufacturing industry.
The uncertainty surrounding a no – deal Brexit, and the exact date of the Britain’s departure from the EU means business activity and investment remains fairly weak.
It is unclear if Britain’s economy will succumb to the current political climate and the uncertainty of Brexit.
Elsewhere, Europe’s biggest economy, Germany, is on the brink of a recession. Donald Trump’s ‘America first’ trade policy, Britain’s planned but uncertain departure from the EU and sluggish growth in the eurozone has had an impact on Germany’s export reliant economy. The demand for German manufactured goods fell by 2.7% in July.
GDP – GDP refers to the total sum of goods and products produced in an economy.
Recession – three consecutive quarters of decline in economic growth.