Britain appears to be bouncing back from the post-Brexit panic in better shape than expected, after a string of indicators showed growth across the manufacturing sector, the building industry and in consumer spending.
A survey of manufacturers reported a rise in exports to their highest level in two years. Persimmon, Britain’s biggest housebuilder, said customers were flocking back to view new build homes. And grocers enjoyed a 0.3% rise in sales in the 12 weeks to 14 August, the best performance since March.
Nicholas Wrigley, Persimmon’s chairman, said that while the result of the EU referendum had created increased uncertainty, the news was quickly digested by customers.
“Customer interest since then has been robust with a strengthening of visitor numbers to our sites compared to the same period last year,” he said.
Economists have revised their pessimistic forecasts for the rest of the year and 2017 following a run of figures showing only a modest dip and steady rise in activity since the June 23 vote.
Pro-Brexit campaigners have taken these figures as a sign that the warnings of an economic collapse after a no vote were alarmist and misleading.
However, Chris Williamson, chief business economist at financial data provider IHS Markit, said the bounceback was mostly the result of a “huge policy response” from the Bank of England and the Treasury.
“You can’t say that everyone who was ringing the alarm bells over Brexit was scare mongering because really it was the warnings that triggered those strong policy actions,” he said.
Bank of England governor Mark Carney said in June policymakers would consider radical action to avert a recession and in August pushed through a cut in interest rates and a £40bn boost to quantitative easing (QE).
The chancellor, Philip Hammond, who rebuffed calls for an emergency budget, has also hinted strongly that the government’s previous plans for budget cuts could be relaxed.
Williamson said that without steep falls in the purchasing manager indices (PMIs) of activity in manufacturing, construction and services for July, collated by IHS Markit, it is possible the economy would have sleepwalked into a recession.
“If the PMIs hadn’t fallen off a cliff, the BoE wouldn’t have cut interest rates and expanded QE,” he added.
The survey by the business lobby group the CBI of manufacturers found that the dive in sterling, prompted by the vote to leave the EU, gave a strong boost to exports of manufactured goods that offset uncertainty in the domestic market.
Total order books were slightly weaker in the three months to August compared with the quarter to the end of July, down from a balance of -4 to -5, the report said.
But the overall picture was of an industry with orders that remained “comfortably above the long-run average”, according to the CBI, with output growth at a healthy pace.
The main shadow on the horizon was a concern that rising import costs would squeeze profitability. The average prices that manufacturers expected to charge over the next three months rose to +8 in August from +5 in July, their highest since February 2015.
Paul Hollingsworth, a UK economist at Capital Economics, said the relatively upbeat tone of August’s survey gave another reason to be tentatively optimistic about the referendum’s impact on business.
“The latest survey is another reason to think that the economy should avoid a deep recession,” he said.
British supermarket sales were boosted in August by the belated arrival of warm summer weather and a gold tinged Olympics feelgood factor, giving the best performance since March, according to Kantar Worldpanel.
The market analysis firm said sales of ice-cream and lollies jumped by nearly a quarter in the last month of that period, while chilled drinks rose by 10% as Brits sought to cool off.
The performance marks a bounceback from supermarkets’ worst performance in two years in July when cold, damp weather hit sales in the wake of the Brexit vote.
Discounters Aldi and Lidl continued to outperform the rest of the market with sales up 10.4% and 12.2% respectively. All the big four major supermarkets saw sales fall back, with Asda the worst of the bunch as sales fell 5.5%. Tesco achieved its best performance in 18 months but sales still fell by 0.4% taking its market share to 28.1%.
The building industry suffered a share price slump ahead of the Brexit vote and in the week following. But Persimmon said trading since 23 June had been strong and that after a short period of wariness, customer interest had increased from a year earlier.
However, after Persimmon’s upbeat first half results and outlook its shares closed up 4.2% and other house builders were also among the biggest FTSE 100 risers, with Barratt rising 4.9%, Taylor Wimpey 4% and Berkeley Group 3.9%.
Along with other housebuilders, Persimmon’s shares fell after the referendum result amid fears that falling consumer confidence and an economic slowdown would dent the housing market. Countrywide, Britain’s biggest estate agent, predicted this week that average prices would fall 1% next year before rising again.
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