UK economy feels the strain of global slowdown as well as Brexit

British manufacturers had their worst month in more than six years and consumers increased their borrowing at the slowest pace since 2014. (AP)
Updated 02 July 2019

UK economy feels the strain of global slowdown as well as Brexit

  • Consumer lending in Britain grows at slowest pace since 2014

LONDON: Britain’s economy has lost momentum and might have shrunk in the second quarter of 2019, according to data that showed the double impact of Brexit and the slowdown in the global economy.

Manufacturers had their worst month in more than six years and consumers increased their borrowing at the slowest pace since 2014. The value of sterling fell against the dollar and the euro after the data was published.

Howard Archer, an economist with EY Item Club, a forecasting group, estimated that Britain’s economy contracted by 0.2 percent in the April-June period.

The Bank of England last month cut its forecast for economic growth in the second quarter to zero.

That largely reflected an unwinding of the rush by many factories to get ready for the original Brexit deadline which has now been delayed until Oct. 31.

But economists said Monday’s manufacturing purchasing managers’ index showed how hard Britain’s factories were also being hit by the slowdown in the world economy caused by the trade skirmishes between the US and China.

The overall PMI slumped to 48.0 in June from May’s 49.4, well below the average forecast in a Reuters poll of economists and its lowest reading since February 2013.

Lack of confidence

Export demand fell for a third month as manufacturers around the world lost confidence.

Allan Monks, an economist at JP Morgan, said the weak PMI survey challenged his view that manufacturing growth would rebound at the start of the third quarter.

Separate data from the Bank of England published on Monday showed lending to British consumers — whose spending has helped the economy cope with the Brexit crisis — rose by its weakest annual pace in more than five years in May. The BoE data also showed the weakest increase since April 2017 in net mortgage lending.

Archer at EY Item Club said May’s mortgage data chimed with other figures which suggested the relief from the delay of Brexit had been limited.

“Improved consumer purchasing power and robust employment growth has also recently been helpful for the housing market, but this has recently shown some signs of levelling off,” he said.

Economists said they were waiting for Wednesday’s PMI of Britain’s dominant services industry to gauge the extent of the slowdown in the overall economy.

Chris Hare, an economist with HSBC, said he expected only a slight pickup which would point to anaemic underlying growth.

“So, considerations about Brexit deadlines notwithstanding, we do not think that now is the time for the Bank of England to be raising rates,” he said.

The BoE has stuck to its message that it expects to raise borrowing costs, assuming Britain can avoid a no-deal Brexit.


Huawei given 90 days to buy from US suppliers

Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Monday, Aug. 19, 2019. (AP)
Updated 20 August 2019

Huawei given 90 days to buy from US suppliers

  • Shortly after blacklisting the company in May, the Commerce Department initially allowed Huawei to purchase some American-made goods in a move aimed at minimizing disruption for its customers

WASHINGTON: US Commerce Secretary Wilbur Ross said Monday the US government will extend a reprieve given to Huawei Technologies that permits the Chinese firm to buy supplies from US companies so that it can service existing customers, even as nearly 50 of its units were being added to a US economic blacklist.
The “temporary general license,” due to expire on Monday, will be extended for Huawei for 90 days, he told Fox Business Network Monday, confirming an expected decision first reported Friday by Reuters. He also said he was adding 46 Huawei affiliates to the Entity List, raising the total number to more than 100 Huawei entities that are covered by the restrictions.
Ross said the extension was to aid US customers, many of which operate networks in rural America.
“We’re giving them a little more time to wean themselves off,” Ross said.
Shortly after blacklisting the company in May, the Commerce Department initially allowed Huawei to purchase some American-made goods in a move aimed at minimizing disruption for its customers.
The extension, through Nov. 19, renews an agreement continuing the Chinese company’s ability to maintain existing telecommunications networks and provide software updates to Huawei handsets.
Asked what will happen in November to US companies, Ross said: “Everybody has had plenty of notice of it, there have been plenty of discussions with the president.”
When the Commerce Department blocked Huawei from buying US goods earlier this year, it was seen as a major escalation in the Sino-US trade war.
The US government blacklisted Huawei, alleging the Chinese company is involved in activities contrary to national security or foreign policy interests.

BACKGROUND

The US blacklisted Huawei, alleging the Chinese company was involved in activities contrary to national security or foreign policy interests.

As an example, the blacklisting order cited a pending federal criminal case concerning allegations Huawei violated US sanctions against Iran. Huawei has pleaded not guilty in the case.

The order noted that the indictment also accused Huawei of “deceptive and obstructive acts.”
At the same time the US says Huawei’s smartphones and network equipment could be used by China to spy on Americans, allegations the company has repeatedly denied.
Huawei, the world’s largest telecommunications equipment maker, is still prohibited from buying American parts and components to manufacture new products without additional special licenses.
Many Huawei suppliers have requested the special licenses to sell to the firm. Ross told reporters late last month he had received more than 50 applications, and that he expected to receive more. He said on Monday that there were no “specific licenses being granted for anything.”