After a run of disappointing data in February, is the UK economy losing its post-Brexit resilience?

EU Referendum - Signage And Symbols
Is the UK economy built on sand? (Source: Getty)

Nina Skero, managing economist at the Centre for Economics and Business Research, says Yes.

While February’s industrial production data were disappointing, we expect the sector to perform well over 2017 boosted by export competitiveness resulting from the weaker pound. Looking beyond the most recent figure, in the three months to February, manufacturing increased by 2.1 per cent, the strongest rise in about seven years.

However, there are different reasons to believe that the economy is losing its resilience. Chiefly, weak investment and the end of the consumer spending boom.

In the fourth quarter of 2016 business investment declined and investment intentions remain subdued amid Brexit uncertainty. With inflation outpacing wage growth, it will be a challenging year for consumers as well. This is evident from the fact that, in the three months to February, retail sales volumes declined 1.4 per cent.

In 2017 we expect GDP to grow 1.7 per cent with the performance deteriorating throughout the year. While the longer-term impacts of Brexit won’t crystallise for some time, the short-term consequences are about to start showing.

Ruth Lea, economic adviser to the Arbuthnot Banking Group, says No.

The economy remains resilient, if less buoyant than in the final quarter of 2016, and should continue to grow this year much as it would have done if there had not been a Brexit vote. And recent business surveys seem to support this view.

Granted, consumer spending is probably slowing, but exports are stronger on the weaker pound. And the labour market remains firm.

Granted, too, February’s data on industrial production, construction and the trade figures all looked weaker, though retail sales bounced back. But we know that monthly data are notoriously erratic and prone to revision. (I was a government statistician for 15 years and speak from chastening experience.)

And they are vulnerable to special factors. The fall in February’s industrial production reflected warmer-than-average weather and the deterioration in the goods balance reflected higher imports of “erratics”. Taking the ONS’s favoured latest three-month comparisons, production and construction grew quite well in February – and will continue to do so.

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