The UK economy grew by 0.3% in November, much more than the expected 0.1% growth indicated by analysts. The economy continues to contract, by 0.1% in October. It’s remarkable how quickly this positive economic development yields some glimmers of hope for the nation’s fiscal outlook. The past fast-forwarding as the automotive sector is recovering quickly. Jaguar Land Rover (JLR) has been at the forefront of this return to vibrant growth.
In November, the output of motor vehicles jumped 25.5%. This surge represented a huge catch-up as JLR started to get back to building cars piece by piece, having ceased all output in September following a cyber-attack. The success of this automotive giant’s recovery pumped a critical shot in the arm to the national economy. This was amidst a month of ups and downs across every sector.
Notwithstanding this encouraging growth number, the outlook was much grimmer for the construction sector, which reported a drop of 1.3% in November. This recession is the biggest three-month drop in almost three years. Now, economists are sounding alarms about the long-term viability of the industry. Discouragingly, adverse weather conditions are leading to a large downturn. Ruth Gregory, the deputy chief economist at Capital Economics, observed this concern.
Despite the better-than-expected growth figure for November, economists were quick to warn that the underlying growth picture should continue to be modest. They found that monthly GDP estimates tend to be more erratic. Three-month rolling data smooths out some of the volatility to depict a more accurate picture of where the economy is headed. The economy has only grown by a feeble 0.1% in the three months to November. This is an improvement from the last three-month period.
Newly appointed Shadow Chancellor Mel Stride expressed his concerns on the state of the economy. He said, when it comes to the economic recovery, “it’s still flatlining.” He criticized government policies that he believes are hindering progress:
“The chancellor promised growth as her number one mission, but a failure to grip the benefits bills – and instead putting up taxes – is weighing heavily on business and the economy.” – Mel Stride
Yael Selfin, chief economist at KPMG UK, noted storm clouds are gathering ahead of the next Budget. Yet, against this backdrop of challenges, economic activity is really picking up. Yet this bright, hopeful outlook starkly contrasts with the grim reality of many sectors—especially construction.
The growing divergence in the performance of the economy highlights the often difficult and at times bizarre economic realities of today’s market. The automotive sector was one of the first to rebound and project resilience. Other regions remain highly susceptible to outside forces from weather events to policy shifts.