UK economy to avoid Brexit recession despite shrinking in August – business live – The Guardian, Theguardian.com

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Brexit uncertainty and the US-China trade war are both hurting British industry.

Fhaheen Kahn, economist at Make UK, the manufacturers’ organization, explains:

“We are 21 days away from the UK leaving the EU and today’s data shows that manufacturing is right in the eye of continued economic uncertainty. There is now a potent cocktail facing the sector of trade wars, a synchronized global downturn in major markets and political chaos which shows no signs of ending.

“The majority of sectors declined with pharmaceuticals and electrical equipment being hit especially hard and vacancies in the sector are also falling rapidly. So long as the current uncertainty persists manufacturing looks as far away as ever from returning to pre-financial crisis levels. ”

This chart, from today’s GDP report, shows the damage:

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UK GDP: instant reaction

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UK GDP: The key charts

I’ve dug through today’s growth report to find the main charts showing how the UK economy will probably avoid a Brexit recession,despite stumbling in August.

This shows how rolling three-month growth took a nasty tumble at the start of the summer, but has since recovered:

Britain is officially half-way into recession, having contracted by 0.2% in April-June.

But to be an official recession, it needs to also contract in July-September. That looks unlikely, given we now know GDP rose by 0.3% in June-August.

But August wasn’t a happy time for the economy. This charts shows how industry and agriculture both contracted, while service sector firms stalled:

Britain’s film and TV production industry boosted growth in the last three months

The Office for National Statistics ’head of GDP, Rob Kent-Smith, explains:

“Growth increased in the latest three months, despite a weak performance across manufacturing, with TV and film production helping to boost the services sector.”

According to the ONS, Britain’s motion picture industry has grown output by a quarter since 2017 , thanks to big box office productions includingStar Wars: The Last JediandPaddington 2.

Britain’s services sector provided the bulk of the growth, as usual.

The ONS reports that services GDP grew by 0.4% over the last quarter, driven by the “professional, scientific and technical sector”.

But in August, the service sector was flat.

Manufacturing had a worse time of it, though, shrinking by 0.7% in August. That’s despite car factories working more than usual, having shifted their summer shutdown forward to April (in preparation for Brexit at the end of March).

Although August was weak, July and June were stronger than expected.

The ONS has revised July’s growth up, from 0.3% to 0.4%. June has also been nudged up to 0.1%, from zero.

That’s why the three-month / three-month growth rate hit 0.3%, stronger than expected.

It also means September’s GDP, due in a month’s time, would need to be pretty weak to put Britain into recession.

NEWSFLASH: Britain’s economy contracted by 0.1% in August, according to the Office for National Statistics’ latest growth report.

That’s a little weaker than expected, and the first monthly contraction since April.

But over the last three months the UK economy grew by 0.3%, the ONS says. That’s a little better than forecast, and could ease fears of a Brexit recession.

More to follow!

Former UK chancellor Philip Hammond has warned Brexiteers that their dreams of striking new free trade deals once Britain has left the EU don’t add up.

In an interview with the Daily Telegraph, Hammond explains that such deals would have “very limited” economic value, and certainly wouldn’t compensate for the loss of tariff-free, frictionless trade with the EU.

He’s arguing for a “rapid-fire zero-tariff trade deal with Europe”, even though it would restrict the UK from striking similar deals with other countries.

The Telegraph’s Peter Foster has tweeted the key points:

European stock markets have just dropped smartly into the red, after China launched another broadside at America.

Beijing’s foreign ministry accused Washington of ‘smearing China’ over its crackdown in Xinjiang, by blacklisting companies and refusing to issue visas to officials.

Reuters has the details:

Beijing said on Thursday that comments by U.S. Secretary of State Mike Pompeo accusing China of human rights violations in its treatment of Muslims constituted a smear against China.

Foreign Ministry spokesman Geng Shuang made the comments at a daily briefing Thursday. He did not mention Pompeo in particular.

U.S. *** Secretary of State Mike Pompeo said in a television interview on Wednesday that China’s treatment of Muslims, including the Uighurs, in western China was an “enormous human rights violation” and Washington will continue to raise the issue.

This has further dampened hopes of a trade deal breakthrough at this week’s talks in Washington, and knocked 0.4% off the pan-European Stoxx (index.

Slowing economic growth and weak trade haven’t stopped the rich spend-spend-spending, if the latest results fromMoët Hennessy – Louis Vuittonare any guide.

The luxury goods brand, also known as LVMH, grew its sales by 11% in the third quarter of 2019, beating forecasts. Fashion and leather goods sales grew by 19%, led by its largest brands Louis Vuitton and Dior.

LVMH said it had shaken off “the difficult context in Hong Kong” – clearly demand for expensive handbags and coats falls when protesters and police are clashing in the streets.

LVMH’s shares have jumped 3.8%, this morning, and lifted shares across the luxury sector with Christian Dior up 4.1% and Burberry gaining 1%.

Sterling just slipped to a one-month low against the euro.

It touched € 1. 1105 for the first time since early September, meaning it has lost 2.3% against the euro in the last three weeks.

Much of those losses have been driven by worries about a no-deal Brexit. Today, though, is more about the euro itself. It’s rallying, after the Financial Times reported that the European Central Bank ignored advice from its own officials not to relaunch its stimulus program last week.

These divisions could make it harder for the ECB to loosen monetary policy even further.

Germany’s economy is also struggling, compounding the risks to the UK economy.

New data show that German exports slumped by 3.9% year-on-year in August, the worst performance this year, with imports falling by 3.1%.

This increases the risk that Europe’s largest economy has fallen into recession this autumn, buffeted by the US-China trade war. Germany, like the UK, suffered a small contraction in April-June.

https://twitter.com/destatis_news/status/ 1182176725318459392

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Two of the City’s big fears – a Brexit-induced recession and a full-blown trade war – are in the spotlight today.

The latest UK GDP report, due at 9. 30 am, is expected to show that growth fizzled out in August. Economists predict GDP was unchanged during the month, after rising 0.3% in July.

And over the last three months, GDP is expected to have only risen by 0.1% – much slower than usual.

Given the economy actually shrank in April-June, there’s clearly a risk that Britain’s economy stagnates. It could even slide into a full-blown recession later this year as Brexit uncertainty continues to hit business investment.

The economy may have got one Brexit boost – car factories stayed open in August, having brought their usual summer shutdown forwards to April. That should have boosted manufacturing output during the month.

But with the eurozone also looking weak, and global trade slowing, there’s not much optimism about today’s August GDP report.

Here’s what the City’s expecting:

• Monthly GDP:unchanged in August compared with July
• Growth in June-August:Up just 0.1% compared with March-May.
• Manufacturing production:Down 0.4% compared with September 2018, but up 0.2% month-on-month
• Services output:flat in August.

We ‘ ll also get UK trade data, expected to show Britain’s goods deficit with the rest of the world widened in August.

But the big trade story is happening in Washington today, where a Chinese delegation led by vice-premier Liu He will meet US counterparts later today.

Hopes of a breakthrough in the ongoing trade war aren’t high, as theUS has just blacklisted 28 Chinese companies over human rights abuses against Muslim groups in Xinjiang province.

China has briefed that Liu He will offer to buy more US agricultural goods in an attempt to break the deadlock, but they’ve also hinted that the two-day talks could end early.

The agenda

• 9. 30 am BST:UK monthly GDP report for August – expected to show GDP was flat month-on-month
• 9. 30 am BST:UK visible trade balance for August – expected to show a deficit of £ 10 bn, up from £ 9.1bn in July
• 1. 30 pm BST:US consumer price inflation for September – expected to show prices rose 0.1% in the month
• 3pm BST:IMF to publish its latest Global Financial Stability Report
• 3. 30 pm BST:IMF to publish its latest Fiscal Monitor