Macroeconomics: UK economy, IB Economics

The phrase 'green shoots of recovery" has been with us for as long as I can remember, and as an economist I only think in terms of business cycles. However, in this case, the latest Purchasing Managers' Index (PMI) implies that the UK economy is stabilising. Yes, manufacturing output is still contacting but at a slower rate than before. 

Factor in a senses that interest rates might have peaked, and some think that there are tentative grounds for optimism. 

The latest analysis of the UK's manufacturing sector is struggling: the latest Make UK/BDO survey of the sector has announced that it has shrunk by 4% this year, and it is forecast to shrink by 3.2% in 2023. 

Apart from the problems with the current environment, industry groups are concerned about a lack of clarity about the long-term future of the sector in the absence of a clear government plan for industry. And this week's interest rate decision is going to mean further pain for the sector. 

Thus far, much of the focus of government aid has been on the hospitality and aviation sectors, however, Larry Elliott in today's Guardian reports on the plight of manufacturing with the head of Make UK arguing that the sector is going to face challenges in the next few months - aren't we all - and that the government will need to rethink its attempts to recapitalise many businesses. 

Even more alarmingly, the Office for Budgetary Responsibility (OBR) has sggested that manufacturing output is likely to fall by 55% in the second quarter of the year. 

The latest PMI data for the manufacturing sector has seen a significant increase to 55.1 in March, from 52.1 in February.

However, before you think that is grounds for celebration, look at the underlying reasons that have driven this: most analysts are arguing that it has been a significant increase in Brexit uncertainty that has prompted firms to act in this way, something confirmed by the IHS Markit/CIPS data, which picks up a substantial rise in the amount of stockpiling going on. 

News, apparently.

There are signs that the UK manufacturing sector is flagging, with the latest data suggesting that confidence is as low as it has been since the Brexit referendum. And it's reported in the Telegraph.

Things must be bad, if the the Telegraph is printing this. That said, don't be fooled - manufacturing doesn't account for a massive amount of GDP, so an over-reaction would be ill-advised.

The latest CBI survey suggests that manufacturing output is falling, and calls for concrete plans to support on energy costs. If you want a clearer indication that the country is about to enter a sustained recession, this is it. The CBI has identified that high inflation is going to act as a drag on consumer spending in the short-term and thereafter the withdrawal of government support for energy bills and then higher unemployment will play their part in keeping expenditure, and by definition, economic growth low throughout 2023.

More evidence of a recovery...this time in the manufacturing sector...

The health, or otherwise, of the UK economy is again called into question, with the latest PMI data suggesting that last month's figure was a blip reflecting pre-Brexit stockpiling and not the more general economic health of the country.  

Another one for the 'government failure' file? This Guardian piece reviews the government's industrial policy one year on - prompted by a TUC report looking for a target of 1m manufacturing jobs by 2030.

Structural change in the UK economy: but why is a decline in manufacturing almost universally depicted as a bad thing? And can this be justified?  

Ooops.

Where is the UK economy heading? Discuss.

Could future examination questions really ask this sort of thing? Or might they look at how we use data.

The latest datasets about the UK economy aren't entirely one thing or another. Which reminds me of a New Zealand bowler, called Bob.