UK growth spurt due to ‘payback for earlier weaknesses’
The UK economy’s growth spurt in November was just a recovery from “earlier weakness” after hits to Jaguar Land Rover’s production lines and “ongoing” problems with data calculations” weighted on earlier readings, top analysts have warned.
Data published on Thursday morning showed the UK economy inched up 0.3 per cent in November despite expectations of marginal 0.1 per cent growth, prompting some economists to label the new figures as “good news”.
But analysis of the data by Oxford Economics has suggested that large parts of the bounce in growth was “payback” for declines in output seen over previous months.
Analysts suggested there may have been a large upsurge in communications and professional services to make up for a sharp drop in previous months.
“This appears to be noisy data rather than there being any strong underlying narrative,” Oxford Economics UK economists Andrew Goodwin and Edward Allenby said.
“We think it unlikely that November’s upside surprise will mark the start of a change of fortunes for the UK economy.”
They added that an uptick in manufacturing was a “rebound” to halted production lines after a cyber-attack on JLR, with output only returning to levels seen around August.
They also raised the alarm on how the higher figure in November mirrored trends in previous years.
Data analysts at the Office for National Statistics (ONS) and other bodies use specific calculations for seasonal trends to remove calendar-related effects on expenditure and output in order to reflect more truthful changes in the economy through the numbers.
Goodwin and Allenby warned there could be some “residual seasonality” in the GDP data, suggesting momentum could “quickly fade”.
UK economy ‘not fundamentally stronger’
Other City economists have warned that the underlying trends in the UK economy were concerning given a high tax burden and struggles among firms attempting to fit new regulations into working plans.
Capital Economics’ Ruth Gregory said: “We shouldn’t get too carried away [with November’s figures].
“We think November’s strength is more likely to be a rebound rather than a sign that the economy is fundamentally stronger than we thought.”
Analysts at Oxford Economics and the Confederation of British Industry (CBI) widely believe public expenditure will lift growth across the UK economy while firms’ performances across the private sector could falter.
Institute of Economic Affairs fellow Julian Jessop said: “The government appears to have given up on growth in favour of policies designed to redistribute income and wealth, and to expand the role of the state.
“This is crushing the ‘animal spirits’ that drive spending, investment, and job creation in the private sector.”
He added that another decline in the construction sector also showed that a stated policy to ‘build, baby, build’ and support construction firms with planning reforms was “failing to launch”.