Broadening Of UK Economic Recovery Elusive

Posted by: : Paul EbelingPosted on: August 20, 2014 Broadening Of UK Economic Recovery Elusive

Broadening Of UK Economic Recovery Elusive

 The UK economic recovery is driven by the services sector, according to revised figures released last Friday, and 2-H of Y 2014 is unlikely to see a rebalancing towards exports and manufacturing.

The 1st  revision of the official Q-2 figures saw GDP growth unchanged from the 1st elease at 0.8% Q-Q, but the 12-month GDP growth was revised up 0.1 percentage point to 3.2%.

This is well above the long term trend of 2.6%, and bodes well for the recovery, which began at the start of Y 2013, continuing strongly into 2-H of this year.

The British GDP is now confirmed at just a little larger than its pre-crisis peak in Q-1 of Y 2008, after which point it had contracted 7.2%.

But the driving force of the recovery remains a potential problem for Britain, as the new details in the figures released Friday reveal.

The large services sector, about 77% of the economy, grew by 1% Q-Q, which was an increase on that sector’s growth in Q-1 when it grew by 0.8%.

Within services, business services and finance made the largest contribution, but the other main sub-sectors also expanded, indicating the robustness of the recovery.

Services sector output is now well ahead of its pre-crisis peak (+3%), but is in the other smaller sectors that growth was subdued in Q-2, and those sectors are still smaller than they were 6 yrs ago.

The production sector continued its weak expansion at 0.3% Q-Q growth, revised down 1%. The construction sector was upwardly revised to 0 percent growth.

The rebalancing of the economy from service sector dominance to export-led sustainable growth from the manufacturing sub-sector is not taking place.

The current strength of Cable is partly the problem. After hitting a high over the summer of US$1.71 Vs GBP, it has fallen back to 1.6610 Tuesday, but this is much higher than at the beginning of the year.

In addition Britain’s largest single trade partner, the Eurozone, is struggling to find any growth at all.

With outside pressures making trade difficult, growth for 2-H in the British economy can continue to come from only 1 place, the services sector.

Stay tuned…

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Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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