The UK referendum was hardly the nation’s greatest hour as the “debate” was fuelled by lies and exaggerations, to an extent on both sides, but mainly from Leave. The Remain side was guilty of ratcheting up the immediate downside of a decision to leave and this has given a false sense of security to some who voted to leave the EU as “the sky has not fallen” (yet). The economy is like a super-tanker and takes quite some time before responding to change; values of stocks and currency are much more volatile, of course.
The UK trade deficit for goods increased from £2.6 billion to £12.1 billion in July, the overall deficit figure which includes earnings from the services sector, came in at £4.7 billion. The weakening pound will hurt the balance of trade to the extent that imports will be more expensive, but UK exporters will be more competitive because of it. However, there was little evidence of this in the August data (which should have benefitted from the initial, post Brexit fall in Sterling: exports grew by £100 million, a tiny fraction of the predicted £4 billion hike, whist imports rose by £2.6 billion.
Industrial production also took a hit over the summer, slipping by 0.4% between July and August which was due, in part, to a fall-off in North Sea oil and gas production. Manufacturing output (i.e. production of goods) actually managed a 0.2% gain in August, but it had declined strongly in June, so this was an example of the famous “dead cat bounce”. Gains in the manufacturing output seem to have come from car manufacturing (ironically, this is under threat from a post Brexit relocation to continental Europe).
There are some analysts expecting that the Bank of England may try to stimulate the economy by a further reduction in interest rates, but this would probably be ruled out when the influence of the weaker Pound on inflation is taken into account. Conventional wisdom says that inflation can be choked off by raising interest rates, this would also provide a fillip to Sterling, but may be rapidly negated by anti-Sterling market sentiment whilst a “hard Brexit” looks increasingly likely.