While the prospect of a no-deal Brexit looking likely, the UK economy is still showing signs of resilience.
The Pound Sterling has rebounded in view of surprisingly strong growth and increased optimism that a no-deal Brexit can be averted. On 10 September, the Governor of the Bank of England Mark Carney compared the pound’s volatility to emerging market currencies.
Economic output in July was 0.3% higher than in June, according to the UK’s Office for National Statistics. That was an unexpectedly strong bounce back, compared to the 0.2% contraction from April to June, when companies stopped stockpiling.
The economy continues to be driven by the service sector – which accounts for about 80% of Britain’s economy – while manufacturing output remains sluggish. There is some evidence that firms are restarting the stockpiling process in anticipation of a higher no-deal Brexit possibility, but it is difficult to know what is the real economic effect of the current political impasse will be on the real economy.
Meanwhile, earnings excluding bonuses continued to surge at an estimated annual pace of 3.8% from May to July, down slightly from the previous reading, while unemployment remains at the historically low level of 3.8%.