In Focus Consumer Credit
Good, but not that good
Analysts believe that a return to GDP growth is certainly welcome, but it is also nothing to celebrate
Tej Parikh Chief economist, the Institute of Directors
The latest official GDP figures show that the economy grew by 0.3% in the third quarter of 2019. A return to growth is welcome news, but narrowly avoiding a recession is nothing to celebrate. The UK economy has been in stop-start
mode all year, with growth punctuated by the various Brexit deadlines. Indeed, the pick-up in the third-quarter
numbers may slightly exaggerate the strength in the economy, with some activity likely to have been brought forward before 31 October. The final quarter of 2019 could be weaker as stockpiles continue to be run down.
Underlying weakness While high employment has provided some support for the economy, underlying weaknesses in investment and productivity still need addressing.
With uncertainty likely to persist and a
continued slowdown in global markets, the onus is on the new government to stimulate economic activity and move the UK beyond its current yo-yo pattern of growth.
Indeed, the pick-up in the third-quarter numbers may slightly exaggerate the strength in the economy, with some activity likely to have been brought forward before 31 October. The final quarter of 2019 could be weaker as stockpiles continue to be run down
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Job market remains strong Meanwhile, the latest official labour-market figures show the employment rate fell slightly to 76%. The UK jobs market remains a source of resilience for the UK economy, but it is showing more signs of strain. With so many in work there has been a lift
to household incomes, which has supported the economy through a challenging period. However, businesses are now finding it harder to access the talent needed to fill
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openings, so jobs growth is expected to slow further.
Plans on ice Many firms are also now putting their recruitment plans on ice as wider projects and investments are bottled up by the uncertainty. Vacancies are likely to continue falling. The pick-up in wage growth earlier this
year has been a plus, but there is clearly a limit to how high pay packets can go. With many firms facing elevated costs
and difficulties raising their productivity game, the margins to raise pay are eroding. A further acceleration in wages now looks unlikely. CCR
December 2019
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