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UK Economy Ground to a Halt in August, but Was it Just a Blip?

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Economic growth flat lined throughout August, but some economists are saying it was only a blip.

Still, others are wondering if this is a sign of underlying economic weakness in Great Britain.

August Economic Standstill

In August, the U.K. economy lost its upward growth and appeared to flat line, said figures from the Office for National Statistics. The data indicated that after the World Cup, the growth enjoyed by the British economy fizzled away.

Those statistics stated that the GDP growth rate in August fell to 0 percent. In July, the growth rate had been 0.4 percent. City economists had been predicting a reduction in the growth rate after the World Cup. That said, they had forecasted a drop to 0.1 percent, not an elimination of all growth.

Is it a Warning Signal?

Some analysts have pointed to the flat economic growth rate is a warning signal that there will be weaker growth rates to come, according to a report in The Guardian. They pointed to the hot weather this summer, along with the World Cup, as having been a blip that encouraged increased consumer spending above the ordinary.

Those analysts cautioned that the growing concerns over a no-deal Brexit will take their toll on economic growth, weakening it substantially.

“It seems that the World Cup may have encouraged spending during July, but the party ended abruptly the following month,” said Schroders fund manager senior economist, Azad Zangana. “It could also be in response to the rise in fear over a no-deal or cliff edge Brexit … If the slowdown is Brexit-related, then it is likely to have persisted through September, and could potentially last for a few more months yet.”

Was It Only a Blip?

The Office of National Statistics underscored that monthly GDP readings should be interpreted carefully. The reason is that they can be quite volatile with significant changes from one month to the next. Though several economists are seeing August as a sign of things to come, many others feel that it’s important to look beyond one month’s growth data.

Equally, many analysts also believe that the weak economic performance in August was only an exception. They pointed out that the Office for National Statistics’s rolling three-monthly GDP figure showed that the U.K. economy is actually experiencing its strongest growth rate in nearly two years. Over the last three months, that growth rate is a solid 0.7 percent, making August only a blip, not a trend.

“This seems likely to continue into the fourth quarter of 2018, when we expect some moderation of UK growth [amid Brexit uncertainty],” said PricewaterhouseCoopers chief economist, John Hawksworth.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.