It’s little wonder that news of a faltering Chinese economy has been met with trepidation across the world. With China contributing more to global economic growth than the United States, the events of the past week have demonstrated that even the slightest wobble is likely to be felt in all markets. Coming so soon after the downturn out of which many countries are still struggling to pull themselves, the sense of fear is justifiably heightened.
Nevertheless, there is some solace in the fact that things are generally heading in the right direction for the UK economy. The latest CBI Growth Indicator shows that economic growth continued to pick up pace in the three months to August and expectations are strong for the next quarter.
The survey of 754 respondents across the manufacturing, retail and service sectors showed the pace of growth sped up for a second month running, with the balance of output volumes standing at +31% in August. This was just below the 2015 high of +33% recorded in May, itself the highest balance since May 2014, when it reached +35%.
It revealed that the strength of growth was broad-based across the sectors, with the business and professional services and the retail sectors making particularly large contributions. Meanwhile, growth in manufacturing remained broadly flat. Expectations for the next three months are also buoyant, with another expansion in business volumes anticipated, albeit at a slightly cooler rate.
“The weather may have been a washout this month but the sun has certainly been shining on the British economy,” said Rain Newton-Smith, director of economics at CBI. “The pace of growth has been energised across the sectors and it is good news that this is set to continue as we head into the autumn.”
However, Newton-Smith admitted that China’s troubles may still have a significant impact on future economic growth.
“The UK’s direct exposure to China is limited but slower growth there and in other emerging markets has a knock-on impact on confidence around the globe and could bear down on UK trade,” she added. “Businesses will need to keep a close eye on turbulence in the markets and whether it spills over into the real economy.”
For now, let’s celebrate the British economy slowly but surely getting itself back on track.