Economic uptick in January but trend shows UK economy still stuck in slow lane

The Chancellor was given a few crumbs of comfort by the number crunchers at the Office of National Statistics upon the release of the official economic data for January.

As Philip Hammond put the finishing touches to his Spring Statement, they showed that UK plc grew by an unexpectedly strong 0.5 per cent in the first month of this year

But whatever he might say in the House of the Commons, the Chancellor knows that despite this he’ll be in the position of trying to make the best of a bad job.

Monthly figures are inevitably volatile, subject to revision, and have to be viewed with a great deal of caution.

The January ones showed a sharp rebound from what was a remarkably poor December in which the economy contracted by 0.4 per cent.

It is the trend that is your friend in economics. So let’s look at that. What it shows is that the three month average for UK plc continues to run at about 0.2 per cent. That’s below the long term rend and below where the Chancellor would it like to be even if he won’t admit it.

The Office for Budgetary Responsibility is set to update its forecasts, and they are likely to compound the problem for him if they line up with what international bodies have been saying about the nation's future prospects.

“The economy has clearly lost momentum since the middle of 2018,” said Andrew Goodwin at Oxford Economics, which about sums it up even if the situation might not be quite as bad as some of the surveys were predicting.

The reason for that loss of momentum hardly needs stating: It’s Brexit and the uncertainty created by the Government’s agonies with respect to that festering carbuncle. However, you can also throw in a markedly weaker global outlook.

Now is not a good time to be committing the sort of economic harakiri the Conservative Party is insisting on delivering to “the British people” its chieftains are always banging on about, and it could soon look worse.

January’s bounce back was largely due to manufacturing and construction picking themselves up off the floor.

The question is how much of that was driven by businesses racing to finish orders before UK plc rolls of a cliff and things get really nasty, and how much was down to new orders.

The figures don’t say, so it’s a matter of conjecture. We’ll have to wait for the answer but if it is the former it doesn’t bode well for the next batch of numbers.

It’s true that UK plc has proved more resilient than people expected, but that this was while the country was still in the EU and it was probably driven by the perception that it would all get sorted out in the end.

Reality has taken a bite out of that. It’s now all but impossible to predict how the Brexit mess is going to resolve itself. We know only that that resilience is about to be severly tested and that the chances of UK plc getting a passing grade aren’t good.