UK GDP grew 0.3% in July helped by the dominant services sector, with growth flat over the three months period; there had been fears that the UK was heading for recession after a 0.2% contraction in the period April – June and a number of weak business surveys.

An economy is deemed to be in recession if it contracts for two quarters in a row; growth in the services sector, which represents 80% of the UK economy was the key driver, although the Office for National Statistics warned that the sector remained weak, saying: ‘While the largest part of the economy, the services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019.’

‘an economy under pressure from uncertainty over Brexit and weakening global economic conditions’

The return to growth in the economy will be a relief for a government under duress and keen to avoid damaging recession headlines in early November; the growth in GDP in July makes another consecutive quarter of contraction between July and September, unlikely which is the definition of a recession.

However, that does not mean that all is rosy – in the three months to July, the economy did not grow, and even if Q3 registers 0.3% growth, it would be the weakest first three quarters of a year since the financial crisis.

There is some evidence that firms are beginning to restart stockpiling in anticipation of the rising possibility of no-deal Brexit next month.

The current political stalemate inevitably affects the economy and a prolonged squeeze on business investment was always going to hit productivity and growth.

Elsewhere, things are arguably worse, with the German economy likely to slip into recession and the eurozone as a whole growing sluggishly.

The British Chambers of Commerce (BCC) also said that concerns remained.

‘Although there was a rise in GDP between June and July, the zero growth recorded on the underlying three-month measure points to an economy under pressure from uncertainty over Brexit and weakening global economic conditions,’ said Suren Thiru, head of economics at the BCC.

‘The manufacturing sector remains an area of concern, with tightening cash-flow, concerns over disrupted supply chains and weakening demand in key markets weighing on activity in the sector.’

A series of surveys of various sectors of the economy had raised fears that the UK was at risk of slipping into recession having delivered pretty gloomy results.

‘it’s not in recession. Political chaos, yes. Economic chaos, no’

However, the latest GDP figures appeared to have dampened these concerns; Samuel Tombs, chief UK economist at Pantheon Macroeconomics said:

‘The pick-up in GDP in July is a reassuring sign that the economy is on course to grow at a solid – perhaps even above-trend – rate in Q3,’ adding that figures ‘substantially’ weakened the case for any cuts in UK interest rates ‘before Britain’s Brexit path is known’.

‘The upside surprise came from the services sector, which displayed broad-based strength and did not seemingly benefit from any one-off stimuli,’ Mr Tombs said.

Analysts have noted that August’s growth figure should be boosted by car manufacturers, which were in operation last month, as many carmakers brought their annual shutdown forward for the original Brexit date in March.

Paul Dales, chief UK economist at Capital Economics said: ‘GDP will get a further boost of about 0.2% in August, when car manufacturers will be at work when they are usually on holiday. ‘Overall, the economy is still fairly weak – we estimate that the underlying pace of growth is around +0.2% quarter-on-quarter – but it’s not in recession. Political chaos, yes. Economic chaos, no.’

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