At first blush, yesterday’s slew of economic news was upbeat.
The UK government’s borrowing fell in August, the Organisation for Economic Co-operation and Development (OECD) raised its growth forecast for the UK this year, and the Office for National Statistics (ONS) said that there has been little impact on the economy so far of the Brexit vote.
All good, if not quite the stuff of champagne and bunting. But you wouldn’t have to be desperately bearish to see that the superficial glitter concealed some rusty bodywork.
While the OECD think-tank edged up its growth forecast for the UK in 2016 by 0.1 per cent to 1.8 per cent, it halved its growth forecast for next year to 1 per cent. A smile, then a sucker punch.
Rubbing the pessimism in, the OECD also downgraded its forecast for global economic growth next year from 3 per cent to 2.9 per cent – the lowest since the financial crisis and recession of 2008-9.
Similarly, although the ONS said yesterday that public sector borrowing fell £900 million to £10.5 billion in August, that was still above economists’ forecasts of £10bn.
It does not give Chancellor Philip Hammond much ammunition in his Autumn Statement in November for any increases in public spending to offset stagnant business investment as we navigate the uncertain post-Brexit vote world.
Meanwhile, the earlier summer data clearly bears out the ONS’s assertion that there has not been any dramatic effect on the UK economy from June’s vote to quit the single trading bloc. But only vaguely Donald Trump-type business headbangers thought any deleterious effect, if there is to be one, would be immediate.
Business lobby groups have been lining up to say Brexit is not a rerun of the collapse of Lehman Brothers in being an overnight watershed moment. Any negatives were always likely to be gradually absorbed amid the tortuous negotiations to quit the EU. Let’s welcome good news, but remain clear-eyed.