UK Economy Growth At A Boost Ahead of Brexit

The economy of UK is witnessing a boost ahead of Brexit, stockpiling by manufacturers grew the economy by 0.3% in the three months to February. On a monthly measure, the economy grew by 0.2%, faster than the 0% anticipates.


The 0.3% rise in the three months to February was the same as the three months to January, after previous estimate was revised higher. Continued IT services contributed towards the boost in economy, manufacturing also played a part to recover from the weakness at the end of last year and the trio of pharmaceuticals, chemicals and alcohol industry served well and contributed their share towards the rising economy.


Outputs in the production and manufacturing saw a growth for the second month in a row, with manufacturing at its peak since April 2008, the ONS said. ONS also added that production industries extended by 0.2% in the three months to February 2019. This indeed, was the first positive 3-month growth since October 2018.


Impact of piling stocks


It was said there had been exterior proof that, some manufacturing businesses have changed the timing of their activity as the UK moved towards the original planned date for its departure from the European Union. Although, the ONS does not habitually collect detailed data on the reasons behind the behaviour of businesses, as part of their survey justification, they have found some qualitative evidence that supported this view but unfortunately, they were unable to enumerate its impact on the economic growth.


The ONS pointed to a closely-watched survey by IHS Markit/CIPS which showed UK factories were stockpiling goods for Brexit.


Month-to-month growth in the industrial production sector was 0.6% in February, with the increase in manufacturing of 0.9%, said the ONS.


Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that, the activities in this sector were the prime reason that the economy had grown more promptly than anticipated.


He said that this might be "due to a temporary boost to production which will unwind" in the second quarter of the year. Construction output also saw the growth faster than expected, perhaps because of the warmer than usual weather in February, he added.

Ruth Gregory, senior UK economist at Capital Economics, also highlighted these areas as the main surprises in the data.


Rise in rates


But, she also said that the growth does not appear to have grown significantly by stockpiling ahead of Brexit. Instead she gave the credit to the growth in imports. Imports rose by 5.3% in the three months to February while exports rose just 0.8%, according to the ONS.


She added that, the Brexit chaos might have exhausted the economy of its impetus in March, as that is the time when the Brexit uncertainty is marked the highest.


The solid growth rate in the three months to February would definitely ease the immediate fears of the economy stalling or contracting in the first quarter and would also provide support to the view that the economy is well placed to cope with whatever Brexit throws up next, Ruth added.


Mr. Tombs said he was revising up his forecast for growth in the first quarter to 0.4% from 0.3%, which specifies annual growth in between of 1.8% and 2%. This could possibly point to a rate rise from the Bank of England's Monetary Policy Committee.


"So the data, together with strong wage growth, put renewed pressure on the MPC to follow through on its commitment to an 'ongoing tightening of monetary policy', despite continued Brexit uncertainty," he concluded.

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