The UK economy might be picking up. The Office for National Statistics (ONS) is expected to report next Friday that GDP grew by 0.5 per cent in the first quarter, its best three-month on three-month growth rate since September. This should be helped by growth in manufacturing, services and construction.
It’s not just the UK that’s recovering, though. We could also see better figures from Germany. Manufacturing orders should stabilise after two months of big falls and industrial production could show another small monthly increase, implying growth of 0.5 per cent in the first quarter. Output would, however, still be some 3 per cent below last May’s peak. And purchasing managers are likely to confirm that growth in services across the eurozone was weak last month, reminding us that any recovery in the region is very fragile.
The UK’s faster growth is, however, not powered by net exports. Quite the opposite. Friday’s figures could show that although the trade deficit in goods narrowed in March it hit a record high in the first quarter as a whole of around £40bn or over 7 per cent of GDP. This implies that net trade subtracted significantly from growth in the first quarter. This is partly due to firms stockpiling imported goods as a precaution against a no-deal Brexit: imports jumped sharply in January and February. We should therefore see the deficit narrow soon.
The obvious inference from the fact that net trade subtracted from growth in Q1 is that consumer spending contributed a lot: retail sales were strong in the quarter. This does not, however, mean that the personal sector generally is doing well. Next week’s report from the RICS will remind us that the housing market is in the doldrums with demand and prices falling despite low supply. Uncertainty about Brexit is only partly to blame for this.
Finally, some US numbers will be closely watched for signs of an impending slowdown. Last month, official figures showed a sharp drop in the number of job vacancies, and small rise in the number of people leaving jobs (both voluntarily and involuntarily). Although this is for now consistent with employment still growing, as existing vacancies are filled, a continuation of that drop in vacancies would be a warning of slower employment growth in coming months.
