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James Smith, developed markets economist at ING, points out that UK’s GDP contracted by 0.1% in August, suggesting there is very little to cheer about the economy at the moment.

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“Admittedly it is worth noting that this latest fall in output followed a decent July figure, which was revised upwards to 0.4%. It is also true that the 0.7% fall in manufacturing output during August was amplified by a fall in volatile pharmaceutical production, according to the ONS (the UK’s statistics agency).”

“However, that was counterbalanced by greater momentum in transport-related output – many of the factory shutdowns that normally occur over the summer had been brought forward to April to shield against possible Brexit-related disruption. That meant that output was perhaps slightly higher for the time of year.”

“In the short-term, there is some potential for manufacturing to bounce back as stock building activities resume ahead of October 31 – albeit with inventory levels already high and warehousing space scarce, this will be on a much more limited scale than before the original March deadline.”

“That said, the economy will most likely avoid a near-term technical recession. Consumer activity is continuing to grow, even if confidence remains fairly depressed. Shoppers appear to have been less fazed by the ups-and-downs of the Brexit process than businesses.”

“But even so, economic growth is likely to remain fairly modest for the rest of this year, averaging around 0.2-0.3% per quarter. This means that the Bank of England is likely to remain cautious, although we still feel its probably too early to be pencilling in UK rate cuts.”