The economy: Do you want good news or bad news first?

10 August 2018, 12:25

It's one of those glass half-full days.

Here's the good news: the UK economy is growing. Indeed, at 0.4%, it's growing twice as fast as it was in the first quarter of the year.

Fears that the weak growth in the spring would continue into the summer were clearly misplaced.

And there's good news when you dig into some of the detail. Business investment is growing by 0.5%, which more than reverses the 0.4% decline in the first quarter.

And the services sector which powers the economy had a good quarter.

In fact, retail, which has had a torrid few years, actually had the strongest single quarter since 2004. That may be down to the World Cup or the good weather.

Either way, it's a relief for those (and there are plenty of them out there today with the travails of House of Fraser) predicting continued strife on the high street.

Now for the bad news. The manufacturing sector is back in recession for the first time since early 2016.

True: it had a strong 2017, and there is something arbitrary about the definition of a recession (two successive quarters of contraction). But it is disappointing news nonetheless.

Moreover, exports are weak - and the trade picture would look even weaker were it not for weak imports too. Consumer spending is also below expectations.

It all adds up to an economy which is firing on perhaps half of its cylinders.

Then again, perhaps that is a good result given the circumstances.

No one knows what will happen with Brexit. Senior ministers think no deal is the most likely outcome (though not the chancellor).

Given that level of uncertainty it's no surprise households and businesses are not spending at a rapid rate. Moreover, economic growth is starting to stutter in Europe as well.

In short, nothing to panic about but not much to get excited about either.