What's going on?
Official data out on Friday showed that the UK’s economy slowed to a crawl in the three months to November, expanding by 0.3% compared with the previous quarter.
What does this mean?
While the UK’s economic growth matched some analysts’ expectations, it was the weakest it’s been for six months as manufacturers’ struggles continued. Britain’s factories have been smacked by weaker overseas demand for their products, now suffering the longest period of monthly declines since the financial crisis.
One of Britain’s biggest industries is car making, but that sector has a slow puncture and is awaiting roadside assistance – quarterly production has fallen 4.3% compared to a year ago. Even if they weren’t buying cars, Brits’ heavy spending on Black Friday helped economic growth in November narrowly beat analyst expectations.
Why should I care?
For markets: Brace for a downpour.
Misery loves company, and the UK’s political negativity is fast attracting economic gloom, with British stocks falling on Friday. Selling investors may be trying to avoid an economy that’s slowing, and which some believe may all but grind to a halt if the UK leaves the European Union (in just 74 days) without any temporary trade agreement in place. Expensive default trade taxes would hit companies on both sides of the English Channel.
The bigger picture: Europe compounds the economic anxiety.
The uncertainty created by Brexit and investors moving money out of the UK has pushed the value of the pound down compared to other currencies. This should encourage more demand for British products from overseas customers (as UK products appear cheaper) and possibly help to stimulate manufacturing. Yet Britain can’t rely on this safety net as the eurozone, its biggest trading partner, is in somewhat of a tailspin. Germany’s economy may be in recession after manufacturing fell in November, and Italy’s economy is likely shrinking too – while France’s bleak outlook only intensifies the headache.