The British economy slowed down in Q3 with the biggest drop in industrial production since 2012 led by a decline in the car manufacturing industry.
- The UK economy grew 0.3% in the 3 months to November, the weakest rate in six months.
- The auto-industry has taken a serious hit amid tightening emissions regulations – Jaguar Land Rover and Ford are to cut thousands of jobs.
- The pound rose on speculation of a delayed Brexit which later proved false.
The Office of National Statistics posted a rate of 0.3% growth I the 3 months to November compared to 0.4% growth in the 3 months to October. However, on a monthly basis the GDP increased by 0.2% in November compared to 0.1% in October.
New vehicles emissions tests interrupted factory production of vehicles significantly, which negatively impacted the UK industry a situation mirrored in Germany and internationally.
At least 2,000 auto workers will be laid off in the UK as job cuts in the industry were announced, and the industrial sector also posted declining stats. Electricity and gas production as well as quarrying, mining, and water supply comprise the sector, with all four elements in decline for the first time since 2012.
The services and construction sector, on the other hand, showed growth, with the services sector making up four-fifths of the British economy. The ONS pointed to Black Friday as a contributing factor in economic growth with strong sales reported in November.
The three-month average is a less volatile and more reliable indicator of economic activity – the decline seen in the three months to November compared to the same period leading up to October reflect a global economic slowdown being impacted by the trade war between the SU and China as well as Brexit uncertainty and other factors.
The auto industry has shown decline recently with the VW emissions scandal causing major losses and China recording the first drop in car sales in 30 years.
#NIESR #GDP tracker puts #UK #GDP #growth at 0.3% quarter-on-quarter in Q4 2018 that matches our own estimate. We put overall UK GDP growth in 2018 at 1.4%, slightly below NIESR estimate of 1.5%. We currently see Q1 2019 GDP growth at 0.2-0.3% q/q amid major uncertainties https://t.co/0Diw4nuz4v
— Howard Archer (@HowardArcherUK) January 11, 2019
With Brexit around the corner, the UK faces potential supply-chain disruption on a massive, national scale with uncertainty clouding the prospects of manufacturers and suppliers in or connected to the nation.
Research and economics director of the British Chambers of Commerce lobby group Mike Spicer said: “These are testing times for many exporters who are feeling the pressure of Brexit uncertainty and broader global issues in the trading environment.”
“As the clock ticks ever closer to March, businesses are becoming increasingly frustrated and looking to Westminster for clarity and precision on the future terms of trade. Firms need to know what customs procedures they will face with their nearest neighbor and other important partners in just over 10 weeks.”
The pound sterling ignored the GDP data and traded up today, perhaps spurred on by the rumors of a delayed Brexit vote which have since been discredited.
The price of gold has also posted gains, up 0.38% and last trading at $1,289.58/oz with a high of $1,295.22/oz and a low of $1,286.22/oz. Gold has hovered near the $1,300/oz mark over the last few days pending market-moving news that will cause it to either test the line of resistance or shy away.