Storm Clouds Over The UK Economy

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What's going on?

According to figures released on Wednesday, the UK economy grew at its slowest pace since 2012 in the first half of the year!

What does this mean?

The data released on Wednesday showed that the British economy grew 0.3% in the second quarter. On the positive side of things, retailers did reasonably well, largely due to the warm-ish weather Brits experienced (warm weather means people spend less heating their homes and more on fun stuff like summer clothes, BBQ equipment and Pimms). However, construction and manufacturing activity declined and the overall rate of growth was significantly slower than last year.

Why should I care?

The bigger picture: The economy needs businesses to invest but thats a big ask right now.

From a long-term perspective, investment by businesses is necessary to increase the productivity of the economy (e.g. by purchasing technology that allows workers to produce more in a given period of time). However, its difficult for companies to invest for the long-term if they are unsure of the future environment in which they will operate. As such, the UKs current political uncertainty (both the Brexit process as well as the hung parliament) is likely damaging its economic prospects.


For you personally: The worry is that the economy will get worse before it gets better.

There is concern that the retail industry will be unable to maintain its recent pace because high inflation will continue to make products more expensive (especially relative to wages, which are rising more slowly). That logically leads to fewer goods being purchased. If that occurs, other parts of the economy will have to pick up the slack, like businesses spending more money (which appears unlikely for the reasons discussed above). The fear is that the second half of this year will make the first half appear rosy by comparison.

Originally posted as part of the Finimize daily email.

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