UK economy Picks Up Pace In Q1
The UK economy has indeed managed to pick up the pace of its expansion over Q4 2018, as predicted earlier. According to the Office for National Statistics (ONS), the nation’s GDP expanded by 0.5% in Q1 of 2019, up from a Q4 2018 reading of 0.2%. However, the bad news is that the growth was strongly linked to the stockpiling of materials to protect manufacturers and suppliers from the effects of a “no deal” Brexit scenario. Q1, of course, runs from January until the end of March. Politically, during this period, the government’s EU withdrawal bill was rejected by the biggest margin in British political history, rejected a second time and then refused as a stripped down “withdrawal agreement”. During the quarter, a no deal exit on 29th March 2019 did seem to be a realistic proposition, leaving businesses with little option but to stock pile. Politically, “no deal” has been rejected by MPs, but it remains the legal conclusion should no agreement passing the withdrawal agreement (or something very similar to it) or notice under article 50 of the Treaty of Lisbon be revoked.
On the strength of Brexit worries, the manufacturing section boasted its fastest rate of expansion since 1988 (this is relative to the previous quarter, of course). Stockpiling in the pharmaceutical sector led to a 9.4% expansion in the sector in Q1. Stockpiling also involved importing goods, of course, leading to a sharp jump in the balance of trade deficit in the quarter to a record high. Historically, the UK runs a trade deficit with the rest of the world, bit operates a surplus in the service sector (notably finance). The trade deficit widened from £8.9 billion to £18.3 billion, with a brisk trade in gold imports and vehicles.
The purchase of gold is usually as a hedge against a weakening economy and currency. The importation of cars in Q1 (to provide a stock) also insurers suppliers against a sudden drop in the value of Sterling which most expect would accompany a no deal exit. The prospect of a no deal exit from the EU has been deferred until the end of October.