October 10, 2019 / 9:40 AM / 14 days ago

UK economy on track to dodge pre-Brexit recession despite weak August

    LONDON, Oct 10 (Reuters) - Britain's economy looks on course
to avoid tipping into recession before it is due to leave the
European Union, despite a small fall in output in August,
official figures showed on Thursday.
    Gross domestic product in the three months to August was
0.3% higher than in the previous three-month period, beating all
forecasts in a Reuters poll of economists, after growing by an
upwardly revised 0.1% in the three months to July, the Office
for National Statistics said.
    However output in August alone dropped by 0.1% on the month
versus economists' average forecast for it to hold steady, after
growth in July was revised up to 0.4%.
    Britain's economy shrank in the second quarter of the year
when businesses found themselves holding unnecessary stockpiles
of raw materials after Britain's departure from the European
Union was delayed from the original date of March 29.
    Two consecutive quarters of contraction would mean Britain's
economy met a commonly used definition of recession, but the ONS
said that the economy would need to shrink by an unusually large
1.5% in September alone for this to happen.
    As well as Brexit, manufacturers across Europe have been hit
by a rise in trade tensions between the United States and China
which has weighed on growth globally.
    The new managing director of the International Monetary
Fund, Kristalina Georgieva, warned earlier this week that the
world economy was suffering a "synchronised slowdown".
    Prime Minister Boris Johnson has promised to take Britain
out of the EU by the end of this month, without a transition
period if necessary - despite parliament telling him to delay
Brexit again if he cannot negotiate a fresh deal. Businesses say
a no-deal Brexit risks causing major disruption to imports. 
    The Bank of England predicted last month that the economy
would manage growth of 0.2% in the third quarter, bolstered in
part by higher public spending. 
    But September IHS Markit purchasing managers' index data
released last week for the private sector pointed to a 0.1%
contraction in the third quarter.             
    The ONS data showed annual GDP growth slowed to 1.1% from
1.3%, less of a fall than the drop to 0.9% which economists had
forecast.
    "Growth increased in the last three months, despite a weak
performance across manufacturing, with TV and film production
helping to boost the services sector," ONS statistician Rob
Kent-Smith said.
    Soft global demand was hurting demand for manufactured
exports, the ONS added, and growth in the dominant services
industry slowed to zero in the month of August alone.
    August trade data also released on Thursday showed Britain's
goods trade deficit widened slightly to 9.8 billion pounds from
9.6 billion pounds in July, versus poll forecasts of 10.0
billion pounds.
    Britain's total trade deficit for goods and services
narrowed slightly to 1.5 billion pounds from 1.7 billion.


 (Reporting by David Milliken and William Schomberg)
  
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