The resilience of the UK economy in the face of chronic Brexit uncertainty has been impressive. Most of the surveys (business, consumer and housing) have been very poor, suggesting the UK will slide into recession. The CBI distributive trades survey pointed to a deep contraction in the reported sales balance for August.
And yet, the UK continues to create jobs. Real GDP has rebounded. The Q2 breakdown confirmed a strong underlying trend in consumer demand. The tight labour market is pushing pay up. But this is not feeding through to inflation, which fell sharply in August. In real terms, the jump in pay has been spectacular this year.
Retail sales have risen this year despite slower consumer credit growth: this morning’s ONS report for August showed sales in volume terms were up 2.3% on a 3m/3m annualised basis, and 2.6% higher than a year earlier.
Investment in intellectual property products has also increased sharply this year, with substantial upward revisions to come following the 2019 Blue Book. The UK remains an attractive destination for venture capital funding and tech-related start-ups. The number of jobs in professional, scientific & technical activities rose 3.0% (6.2% annualised) in the first half of 2019. For information & communication, the number of jobs expanded by 2.1% (4.2% annualised). The UK could enjoy a strong economic upswing heading into 2020, if a no Deal Brexit is averted. The DUP yesterday softened its stance over Northern Ireland, boosting the Prime Minister’s chances of striking a new Brexit deal.
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