The fact that the pound rose on the currency markets after news that the UK recorded no growth at all in the last few months of 2019 tells its own story. The economy performed badly – but not quite as badly as some had feared.
In the end, a relatively strong December meant ministers were spared the task of having to explain why national output had fallen for a second time in three quarters. But that was largely due to the boost provided by the government.
Of the other components of gross domestic product – the official growth measure – investment was dragged down in the fourth quarter by Brexit jitters, while exports were affected by a slowing global economy and trade tensions between the US and China.
In 2019 as a whole, the economy grew by 1.4% – a slight improvement on the 1.3% recorded in 2018. The figures for GDP per head of population showed an even weaker picture, a 0.1% decline in the fourth quarter and a modest 0.8% increase for the year.
That is now considered history by the financial markets, where analysts think the final three months of 2019 represent the economy’s low point.
One factor is the improvement in business sentiment since the election. Surveys have suggested that some of the investment that had been on hold has now been sanctioned. The “phase one” trade deal agreed between Washington and Beijing has removed the threat of intensifying protectionism.
Wages are rising faster than prices, which should support consumer spending. And the UK chancellor, Sajid Javid, is poised to deliver an expansionary budget next month.
It is not all good news. The agreement between China and the US amounts to a truce, not a permanent peace. Businesses will remain cautious about investment all the time there is a risk that the UK and the EU will fail to agree a trade deal. The impact of coronavirus on the global economy is growing.
On balance, the positive should outweigh the negative – at least for now. Growth will rebound in the first quarter and looks likely to be faster in 2020 than in 2019. But boom-boom Britain it won’t be.
