LONDON (Reuters) – Rarely has Britains economic outlook been so unclear for a new prime minister as it is for Boris Johnson, with strengths such as the lowest unemployment in 44 years contrasting with signs in business surveys of a slowdown or even a recession.
FILE PHOTO: Prime Minister Boris Johnson holds his first Cabinet meeting at Downing Street in London, Britain, July 25, 2019 Aaron Chown/Pool via REUTERS
More than three years into the Brexit crisis, Britains economy probably slowed to a standstill in the April-June period and might even have contracted for the first time since 2012, economists say.
At least part of the weakness can be attributed to a hangover from a stockpiling boom in the run-up to the original Brexit date of March 29, when companies brought forward work to get ready for possible disruption.
But there are other suggestions of more underlying problems.
Below are some important gauges of the health of the worlds fifth-biggest economy.
Business investment has flat-lined since the Conservative Party won the 2015 general election with a pledge to hold a referendum on membership of the European Union. That ended a rise which began after the financial crisis of 2008/09.
The malaise looks likely to continue as companies assess the risk that Britain leaves the EU on Oct. 31 without a deal, something Johnson has said he is prepared to do if he cannot strike a new agreement with the bloc.
On the face of it, the labour market is the strongest part of Britains economy. The unemployment rate is the lowest since the three months to January 1975 and pay is rising at the fastest rate in a decade.
But there are also signs of weakness emerging. Employment growth slowed sharply in the three months to May and self-employment accounted for all the jobs added. The number of employees fell by the largest amount since 2011.
Official data showed strong growth of 0.5% in the first quarter from the last three months of 2018, fuelled by the stockpiling boom.
The hangover from that rush and earlier-than-usual closures of auto plants in April, also linked to the March 29 Brexit deadline, mean gross domestic product probably showed zero growth or shrank in the second quarter.
Official GDP data is due on Aug. 9 but business surveys published recently have painted a picture of an economy struggling for momentum.
The closely watched IHS Markit/CIPS survey of the services sector is deep into territory associated in the past with interest rate cuts by the Bank of England.
The new finance minister is under less immediate pressure to fix the public finances than his most recent predecessors but he will have only limited resources to boost government spending or cut taxes, as promised by Johnson in his leadership campaign.
Britains headline measure of total government debt stands at more than 1.6 trillion pounds ($2.0 trillion), equivalent to 75% of economic output, down only slightly from historic peacetime highs of more tRead More