The UK economy is barely growing, next week’s numbers could show.
On Tuesday the NIESR is likely to estimate that real GDP rose by just 0.2 per cent in the second quarter, implying pretty much no growth at all in GDP per person. This would dash hopes that the economy would recover after poor weather in March depressed activity.
Official numbers will provide some detail about this weak growth. They should show that although construction output rose in May, output is well below last years’ levels and on course to fall in the second quarter compared to the first. This is because housebuilding is still weak and commercial work is falling, partly because of uncertainty about Brexit and partly because of the over-supply of retailing space. None of these factors is expected to disappear soon.
Other figures should show that although manufacturing output rose in May it too is on course to fall in the second quarter. One reason for this should be evident in trade figures. Although these could show that the trade deficit narrowed in May after April’s near-record high, they’ll show that in recent months imports have grown faster than exports, implying that net trade has subtracted from growth.
We’ll see a reason for this in figures from the eurozone on Thursday. They could show that while industrial production in the region recovered in May after a fall in April, it is lower now than it was over the winter months. This means the strong growth we saw last year has now stopped. That’s bad for UK exporters. It’s not, though, the sole reason for exporters’ woes; even when the eurozone was growing well, net exports added relatively little to UK growth.
All this means that what growth there is the UK economy is coming from services. Even here, however, we’ll get some worrying news next week. The RICS is likely to report that house prices and sales are both flat, and that estate agents expect prices to fall in coming months, albeit in London and the south east: elsewhere, they expect rising prices.
This has a wider implication. Quite aside from the absence of wealth effects, flat housing activity is bad for retailers as it depresses demand for housing-related items such as furniture and carpets. With little sign of any upturn in the housing market, retailers’ problems might well be long lasting.
