It looks like the UK has bounced back from its economic slump — but it is still headed for its worst year since the financial crisis

pulse

October 13, 2018 8:31 AM

The British economy may finally have gotten itself out of the deep rut it entered at the end of 2017, but it still looks to be headed for its worst year since the financial crisis in terms of pure economic growth.

UK economy looks to have bounced back strongly from its start of the year slump over the summer.
The strong data, however, masks the likelihood that the economy will revert back to type for the rest of the year.
That's according to Ruth Gregory, senior UK economist at Capital Economics.

Figures from the Office for National Statistics likely expanded 0.7% in the three months up to August. Having grown at a sluggish 0.2% per quarter in the first half of the year, the ONS' data suggested that things finally picked up over the summer.

This was thanks largely in part to an incredibly un-British streak of hot weather, and an even more uncharacteristic run by the England football team during the World Cup. The two events in tandem increased retail sales, boosted the amount Brits spent in restaurants and pubs, and in isolation, the weather allowed for greater productivity in the UK's construction sector.

After several quarters of worryingly slow growth — which themselves were impacted by particularly poor weather — it finally looks, on the surface at least, that the UK economy may be recovering just in time for Britain to face the economic hit of leaving the European Union.

Unfortunately for the UK, however, research house Capital Economics is inclined to believe that the pick up will ultimately be short lived, and that growth in 2018 will be the lowest since 2010, when Britain was just emerging from the depths of the financial crisis.

"We doubt that the recent improvement will last, for a few reasons," Ruth Gregory, senior UK economist at Capital Economics said in a note to clients on Friday.

"Overall, we have not changed our view that GDP growth this year as a whole will come in at 1.3% — the slowest annual rate since the crisis."

Gregory lays out three separate reasons to believe that the summer's strong growth is destined to simply be a brief positive in an otherwise negative trend:

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