Bears are gathering to welcome bullish Boris
Did the economy shrink in the second quarter of the year? While it is impossible to be sure, we will get another clue this week when the Office for National Statistics (ONS) publishes its GDP estimate for May – and so far, the signs are not good.
Read more: Boris Johnson to crack down on crime and demand immigrants speak English in latest campaign pledges
One month ago the ONS estimated a 0.4 per cent contraction in April, notably worse than economists had been expecting. Such monthly figures can be erratic and prone to significant revisions, yet bearish signs are increasingly commonplace. The latest private sector business surveys point to a decline in quarter two, with economists in both Westminster and the City forecasting a negative reading.
This morning accountancy giant EY predicts a 1.6 per cent drop in business investment in 2019 as a whole, while fellow beancounters at Deloitte report that chief financial officers are at their most risk-averse since the collapse of Lehman Brothers.
The lingering uncertainty around Brexit is not helping, of course, and EY’s economists say growth will be even lower if the UK is forced to extend Brexit once more at the end of October. However it requires a large degree of insular-thinking to blame Brexit entirely. Growth levels are abysmal across Europe and the Trump-led trade war is exacerbating an already-portentous slowdown throughout much of the world. All of a sudden the prospect of monetary easing is back on the table and markets have returned to their seemingly-perverse post-crisis habit of jumping at the sound of bad economic news. Here in London, the FTSE is up nearly 400 points in little more than a month.
Read more: Boris Johnson denies being shut out of top secret meetings as foreign secretary
This is the mood music greeting the Tory favourite to enter Downing Street in a fortnight tomorrow. Boris Johnson’s fans adore his ability to inject optimism into the most miserable of party conferences and the former mayor of London has already talked-up his determination to lift the mood around Brexit. But rhetoric is one thing, and raw economic realities are another. The political circumstances paving the way for Johnson’s long-touted journey to Number 10 have been fortunate, but he may find that it is not an altogether lucky time to be the man at the top.
Main image credit: Getty