UK turns in strong pre-Brexit vote growth

Posted on July 27, 2016

©Bloomberg

Britain’s economy expanded at a good pace in the three months leading up to the EU referendum.

While many surveys reported falling confidence in the run-up to the vote on June 23, official data show the economy grew by 0.6 per cent in the second quarter of the year, compared with 0.4 per cent in the first quarter.

    This was a bit stronger than the 0.5 per cent figure expected by economists.

    Chancellor Philip Hammond said that the Q2 growth figure showed the “fundamentals of the British economy are strong”, adding, “we enter our negotiations to leave the EU from a position of economic strength”.

    Growth was led by a strong performance from the service sector, which expanded by 0.5 per cent, and a rebound in industrial production which grew by 2.1 per cent. The construction industry contracted by 0.4 per cent.

    Joe Grice, chief economist of the Office for National Statistics, said that “any uncertainties in the run-up to the referendum seem to have had a limited effect”.

    The ONS said that monthly data showed strong growth in April, with flatter performances in May and June.

    At this stage, the ONS only has hard data for about 35 per cent of the June GDP estimate and relies on economic models to fill the gaps.

    But the lack of a significant drop-off in June will allay some of the concerns of economists who had feared the UK was already slowing sharply before the shock of the vote to leave.

    “We can only hope that the fear of post-vote jitters has also been overblown,” Alan Clarke, economist at Scotiabank, said.

    Data for the period after the vote are still very limited, but Martin Weale, one of the Bank of England’s rate-setting committee, told the Financial Times this week that the exceptionally weak post-vote purchasing manager survey data meant that he now favoured an immediate stimulus for the economy.

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