It looks like the UK has bounced back from its economic slump — but it is still headed for its worst year since the financial crisis – Finance

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  • The UK economy seems to have rebounded strongly from the beginning of the recession during the summer.
  • However, strong data masks the likelihood that the economy will return to type before the end of the year.
  • This is according to Ruth Gregory, senior British economist at Capital Economics.

The British economy may have finally emerged from the deep rut it entered at the end of 2017, but still expects it to begin its worst year after the financial crisis in terms of net economic growth.

Figures from the Office of National Statistics likely increased by 0.7% in the three months to August. In the first half of the year, growth was 0.2% for the quarter, the ONS data suggested that everything was picked up at the end of the summer.

This was largely due to the incredible non-British strip of hot weather and even more uncharacteristic game of the football team of England during the World Cup. Two events in tandem increased retail sales, increased the number of Britons spent in restaurants and pubs, and, in isolation, the weather made it possible to increase productivity in the UK construction sector.

After several quarters of anxiously slow growth, which themselves have been affected by particularly bad weather conditions, it at least looks, at least on the surface, that the UK economy may just come for Britain to face an economic blow to leave the European Union.

Unfortunately for the UK, however, Capital Economics research house is inclined to believe that the receipt will ultimately be short-lived, and the growth in 2018 will be the lowest since 2010, when Britain just stepped out of the depth of the financial crisis.

“We doubt that the recent improvement will continue for several reasons,” said Ruth Gregory, a senior British economist at Capital Economics, in a note to clients on Friday.

"In general, we have not changed our opinion that GDP growth this year as a whole will be 1.3% – the slowest annual rate since the crisis."

Gregory expounds three distinct reasons for believing that strong summer growth is destined to simply be a brief positive in a negative trend:

  1. Most of the big take-off in the summer was, as already mentioned, right up to the World Cup and warm weather. Now both of these crutches have been removed, everything is likely to return to their pre-summer state. “A number of temporal factors, such as a jump in spending on high streets and“ catching up ”growth in the construction sector, have stepped up activity and should be canceled,” Gregory wrote.
  2. The summer surge of growth has in fact masked the fact that the “fundamental driving forces” of the British economy — those that maintained growth rates that were so low after the referendum — have changed little. “Admittedly, the chief economist of the Bank of England, Andy Haldane, said in this speech this week that there are signs of a“ new dawn, ”Gregory wrote. "But with inflation up again, the improvement in household food expenditures was small."
  3. Finally, according to her, the uncertainty regarding Brexit will have an even more obvious negative effect on growth, as the deadline for March 29 approaches. “Uncertainty of Brexit, which, according to our estimates, hit 0.5 ppt or so, from business investment since the referendum, it will probably worsen until it is better, ”she said. “Despite the fact that Teresa May can make a deal with Brexit (maybe next week), we are optimistic about the prospects for her approval in parliamentary elections.”

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