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ECONOMIC DATA THIS WEEK

UK GDP, monthly estimate for May 2019:  The ONS also publishes the monthly output data for the services and construction sectors from which the monthly estimate for GDP is built-up.  The rolling 3-month growth rate to May was +0.3% - this is the second consecutive slowing of growth since the peak of +0.5% in March (the April figure was revised up slightly).

As we have commented before, the data for 2019, at least so far in the year, has been complicated by the impact of Brexit planning.  The 1st quarter of the year (January to March) was boosted by stock-building and the April was artificially low mainly because of the precautionary (but ultimately unnecessary) maintenance shut-downs that the Automotive industry moved from the Summer to April.  May reflects a partial bounce-back that we have noted above, but the rest of the economy is tepid - while there was some growth in the construction sector in May, services was unchanged.

Unless June is a spectacular month - and there is no evidence to suggest that this will be the case - the data for April and May suggests that the UK economy will struggle to show any growth and may even see a contraction in the 2nd quarter.  Some bounce from this is inevitable during the 3rd quarter, but the risk remains that the UK could have a minor recession during 2019, especially if we crash out of the EU without the withdrawal agreement that triggers the transition period.

There are more details in the ONS Statistical Bulletin which you can download from their web-site at https://www.ons.gov.uk/releasecalendar (10 July) or request from MTA.

Bank of England Agents’ Summary of Business Conditions, 2019 Q2:  The latest summary from the Bank of England’s agents broadly reflects other surveys and data, with manufacturing output growing at a moderate pace, supported by increased food production.  However, this only represented a levelling off in the slowing pace of growth that the Agents have recorded since the start of 2018.  They note that the dip in automotive output in April is likely to be corrected to some extent by an increase in August when the maintenance shutdowns usually occur.

Growth in manufacturing exports was weak with some contacts concerned that they had lost, or would lose, sales to overseas competitors as European customers reassessed their supply chains.  This was balanced slightly by stronger demand from the USA, although concerns over the US-Chinese trade talks is an issue and there was also weaker demand from China for automotive exports.

Investment intentions weakened to its lowest level since January 2010 with exporters of manufactured goods especially noted as being cautious about investment.  Contacts said that investment decisions were driven by necessity or the prospects of clear returns.  Capacity utilisation remained above “normal”, reflecting skills shortages and strong demand in some sectors - engineering was noted as one area where skills are still an issue.  Capacity issues in manufacturing eased, partly because of the weakness in the automotive industry, but companies in the construction supply chain reported that they are working at full capacity.

This report also includes analysis of a special survey of companies preparations for Brexit.  This indicated that the postponement of Brexit had done little to change respondents views about the economic outlook, with around ¾ saying that there was no change in uncertainty - what it does not ask, however, is the level that this uncertainty is at.  It also indicated that most firms have made preparations for Brexit - about half of companies implemented these plans in the 1st quarter and will maintain those through to October, while just over a further ¼ had implemented some plans in Q1 and would do more before October.

You can access the Bank’s Agents’ report, including the section on the Agents Survey on Brexit preparations from their web-site at https://www.bankofengland.co.uk/agents-summary/2019/2019-q2 or request it from MTA.

UK Labour Productivity, 1st Quarter 2019:  Data from the ONS shows that labour productivity, measured as output per hour, fell by -0.2% compared to the start of 2018 for the whole economy.  Manufacturing labour productivity fell by -0.9% on the same basis.  The fall in manufacturing productivity was because the number of hours worked grew twice as fast as output whereas the services sector saw output grow slightly more rapidly than hours worked.

You can get more information in the ONS Statistical Bulletin which is on their web-site at https://www.ons.gov.uk/releasecalendar (5 July) or on request from MTA.

Investment Grants in Scotland:  The Scottish Government still uses a grant based system for supporting investment - Regional Selective Assistance (RSA);  details of this scheme are available at http://www.scottish-enterprise.com/services/attract-investment/regional-....  They produce a report that includes accepted offers and payments made and the reports for the 4th quarter of 2018 and the 1st quarter of 2019 can be downloaded at https://www.scottish-enterprise.com/our-organisation/accessing-our-infor... or is available on request from MTA (we can also add you to a mailing list to receive these reports as they become available).  Although these grants cover the whole economy, you might find some new contacts among those companies who have recently received grants.