Warm weather boosts UK's economic growth as retail sales increase

Irving Hamilton
August 12, 2018

It comes after growth slumped to 0.2 per cent amid frosty weather brought in by the "Beast from the East" in the first quarter.

Britain's economy picked up some speed in the second quarter after a sharp winter slowdown earlier in the year but lost momentum in June, official data showed on Friday.

Sterling, shaken over the last week by growing talk of a no-deal Brexit, was little moved by the data which painted a familiar picture of growth led by the services sector while businesses were reluctant to raise investment much. United Kingdom economic growth lags that of other major industrialized nations amid uncertainty over Britain's departure from European Union.

The economy picked up in the second quarter as retail sales and construction benefited from a warm weather boost.

The Office for National Statistics said that UK GDP was 1.3% higher compared to the second quarter previous year, also as anticipated, up from 1.2% annual growth in the first quarter. "Overall we judge that the economy's performance in Q2 was a touch disappointing, bearing in mind the support to growth from a double weather whammy of a recovery from a cold Q1 and a boost from a warm Q2", Investec chief economist Philip Shaw said.

South Western Railway strike called off by union
Mick Cash, RMT general secretary, claimed Northern management had made a "mockery" of talks and "strung along" union reps. It comes just days after SWR confirmed the proposed strike on August 11 was set to go ahead after talks broke down.

Ruth Gregory, senior economist at Capital Economics, said growth would have been weaker had it not been for a big contribution from inventories, offsetting a "whopping" 0.8 percentage-point drag on growth from net trade, which was still down 0.5pp even excluding the volatile valuables component.

However, the ONS added that underlying growth remained "modest".

The ONS said the latest figures show "a continuation of the positive growth seen in the three months to May", making the most recent three-month growth rate comparable to growth rates through 2017. At the same time, construction logged a quarterly growth of 0.9 percent. Retailers in particular have struggled.

Output in the production sector fell by 0.8% in the second quarter of 2018, the weakest quarterly growth since December 2012. This was driven by a 0.9% fall in manufacturing and a 2.7% fall in energy supply, while mining and quarrying, and waste management production both rose by 0.7% and 1.9% respectively.

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