Warmer weather helped the British economy grow at a faster pace in the three months to the end of June, despite official figures showing the manufacturing sector slumped into recession for the first time since the Brexit vote.
The Office for National Statistics (ONS) said GDP increased by 0.4% in the second quarter from a rate of 0.2% in the previous three months, helped by stronger retail sales and good weather, which enabled the construction industry to make up lost ground from heavy snow earlier this year.
Philip Hammond, the chancellor, said Brexit uncertainty was depressing economic growth, as he used a trip to West Midlands on Friday to unveil £780m of new funding for high-tech industries.
Service industries experienced robust growth of 0.5% in the second quarter, with the retail and wholesale sectors providing the strongest contribution, helped by the warm weather tempting shoppers back to the high street.
The figures showed trade acted as a drag on GDP growth in the second quarter, suggesting there was no longer a boost for manufacturers from the weak pound – making sales of UK-made goods since the EU referendum more competitive.
Britain’s trade deficit – the difference between imports and exports – widened by £4.7bn to reach £8.6bn in the three months to June, due mainly to falling exports of goods and higher levels of imports. The figures also showed the UK becoming more reliant on the EU for trade, despite the efforts of ministers to drum up interest elsewhere around the world. Over the past year, exports and imports of goods to and from the EU increased by more compared with non-EU countries.
Inflation in the US continued its gradual rebound in July, clearing a path to a September interest rate increase by the Federal Reserve and leaving open the potential for a fourth hike this calendar year in December.
Headline inflation, as measured by the consumer price index, rose a modest 0.2 per cent in July from June, up from 0.1 per cent in June from May. Higher housing and food costs offset a decline in energy prices last month. The CPI was 2.9 per cent year-over-year, unchanged from June; the fastest pace in more than six years.
Core CPI – which excludes food and energy – was 0.2 per cent higher last month from June, the same pace in both May and June. However, for rate hawks, that lifted the year-over-year increase to 2.4 per cent, the largest 12-month increase since the period ending September 2008, according to the US Bureau of Labor Statistics.
The Fed's next scheduled two-day policy gathering is set for September 25-26. It's scheduled to meet on November 7-8 and on December 18-19. It will release a fresh statement of economic projections in September and December, with chair Jerome Powell to hold news conferences at the conclusion of those two meetings.
German Economy Minister Peter Altmaier has sharply criticised U.S. President Donald Trump’s tariffs and sanctions policies, saying such measures were destroying jobs and growth and that Europe would not bow to U.S. pressure regarding Iran.
Altmaier lauded the agreement reached by European Commission President Jean-Claude Juncker during negotiations with Trump last month, saying the interim deal had saved hundreds of thousands of jobs in Europe.
The U.S. and the European Union are embroiled in a spat after Trump imposed tariffs on aluminium and steel imports and Brussels responded with retaliatory tariffs on some U.S. goods.
Trump had also threatened to impose tariffs on EU auto imports but reached an agreement to hold off on taking action after meeting with Juncker at the White House last month.