Next few weeks key for economy
PUBLISHED: 14:09 08 September 2017 | UPDATED: 14:09 08 September 2017
It’s not just back to school for the nation’s children, this week, but also for politicians and British business.
It’s heads down and concentrate for the crucial 15 weeks between now and Christmas. These are critical for most sectors.
Retailers face their busiest trading period; media companies expect an uptick in seasonal advertising; construction companies hope to win contracts and make progress with ongoing projects before the winter sets in; while the car industry hopes that new registration plates will lure buyers back to the forecourt.
Home owners looking to buy or sell want to do so before Christmas, while home improvements need to be done before the relatives arrive.
Meanwhile, the City and the professional services sector are anxious to get deals moving, before any more holidays can interrupt them.
However, this year’s back to school enthusiasm is tempered by global threats that could rock world stock markets. Brexit is one of these, although its shock factor has waned.
More difficult to gauge is the menace of North Korea and an intemperate US President’s reaction to the rogue state. Terrorism remains a threat that undermines wider investor confidence, as well as directly hurting sectors like travel and tourism. Any slowdown in China’s economy will also have ramifications around the world.
With such concerns on the horizon it is a wonder that stock markets have held up as well as they have in 2017. Well, many market experts think September could be the point where a correction comes.
Figures out this week suggest that the pessimists have a point and investors could suddenly become more cautious. In the UK there are real signs of a summer slowdown, which will eventually show in GDP stalling or even contracting.
The first big economic indicator of the week showed that Britain’s builders have hit a roadblock. Construction had its weakest month in August since the Brexit referendum, which is largely down to spending cuts and uncertainty after the Brexit vote.
Civil engineering work has stagnated and, as Hays the recruitment company said last week, projects that were on the drawing board ahead of last year’s vote have not progressed any further.
The latest figures show that construction is flirting with another recession. If Brexit talks go badly and more big businesses, like banks and asset managers, decide to move people to Europe, then a sharp downturn in the commercial property sector seems likely.
The next blow to the UK economy was the latest data on the crucial services sector, which showed sector growth falling to the lowest rate in almost a year.
Consumer-facing companies like restaurants, hotels, gyms and hairdressers took the brunt and firms blamed subdued demand from clients and rising uncertainty. Worryingly slow growth in services, which accounts for 80% of the UK economy, could see the UK tip over into recession, as the autumn chill descends. Meanwhile car sales fell in August for the fifth month running, although this is traditionally a quiet month for car sales.
There was better news from the retail sector, as sales picked up slightly in August, according to KPMG’s figures. However, retailers are still bracing themselves for a difficult autumn as the impact of reduced spending power starts to take its toll.
All of this means the economy is running out of steam and the fact that Brexit negotiations seem to be going nowhere piles on the uncertainty.
Not even an upbeat report from manufacturers – who are enjoying their best conditions in two decades, thanks to the fall in the pound and rising export orders – can reverse the evidence that the UK economy is struggling to get into gear.
Reading the runes is tricky for businesses right now and that back to school spring in the step, could quickly turn to a trudge.