Evidence mounts that post-Brexit Britain is headed for recession

BEFORE the referendum, economists were in near-unanimous agreement that a vote to Leave would hit the economy. And as predicted, the past three weeks have been torrid. The pound has fallen by one-tenth against the dollar; the FTSE 250, an index of domestically focused firms, is down. Alongside the now-familiar turmoil in financial markets, there is growing evidence that the real economy is slowing.

It is not easy to assess the economic impact of Brexit, because official data are published with a long lag. The first official estimate of GDP growth in the third quarter will not come out until late October.

But there is a smorgasbord of other indicators of economic activity—in particular, data “scraped” from the internet—which occur at a higher frequency than official data are published. None of the observations is robust on its own. But together, they hint at how the British economy is doing after Brexit.

It is not all doom. Consumer spending seems to be holding up. OpenTable, a restaurant-booking website, showed a drop in reservations during the referendum, as people made time to vote or watch the coverage. After the next weekend, however, reservations were back to normal.

Shoppers have not been too affected, either. Sales at John Lewis, a department store, which has published weekly figures to July 9th, are up on previous years. The number of people entering shops, a decent proxy for retail spending, has not much changed since the referendum, according to data from Footfall, a consultancy. Supermarkets are not aggressively discounting, finds mySupermarket, a price-comparison site. Tesco, Britain’s biggest, had 23.7% of products on promotion on July 8th, down from 24.8% just before the referendum.

All this chimes with what economists predicted—that consumer spending would hold up. Over half of voters plumped for Brexit, after all, so they should be happy shoppers. An economic slowdown does not immediately pinch people’s pockets. Instead, the assumption was that investment would be whacked. Companies would put off big decisions on capital spending or recruitment, given the uncertainty about the future of the economy.

It looks a fair prediction. Firms already seem more reluctant to take on new staff. Data from Adzuna, a job-search website with over 1m listings, suggest that in the week to July 8th there were one-quarter fewer new jobs than in the first week of June. Part-time roles appear to have been particularly hit. Scotland, which was already near recession because of low oil prices, is suffering most.

While some Britons struggle to find new jobs, others may be losing theirs. A Bank of England paper from 2011 analysed Google as a window into the labour market. Searches for “jobseekers” (as in jobseekers’ allowance, an unemployment benefit) have historically been correlated with the unemployment rate. In the first fortnight in July, Britons searched for that word about 50% more frequently than in May. This suggests that unemployment is now 5.3%, not the official rate of 5% (last recorded for the three months to April).

Businesses are cutting investment, too. On Funding Circle, a peer-to-peer loans website for small firms, the volume of lending is about 10% lower so far in July than it was in the same month last year. The number of planning applications—for permission to expand premises, say—is another decent proxy for investment spending. Though there is a lag in registrations, a tally of applications in London boroughs in the week after Brexit currently stands at one-third below their level a year before.

The tail-off in planning may be linked to a slowdown in the housing market. Data scraped from Zoopla, a property website, suggest that of about 6,000 London properties listed from June 24th to July 11th, roughly 1,000 have had their price cut since the referendum. A survey by the Royal Institution of Chartered Surveyors published on July 14th, which accounts for the post-referendum period, shows a sharp fall in inquiries from homebuyers.

Ben Reilly wrote:

BEFORE the referendum, economists were in near-unanimous agreement that a vote to Leave would hit the economy. And as predicted, the past three weeks have been torrid. The pound has fallen by one-tenth against the dollar; the FTSE 250, an index of domestically focused firms, is down. Alongside the now-familiar turmoil in financial markets, there is growing evidence that the real economy is slowing.

It is not easy to assess the economic impact of Brexit, because official data are published with a long lag. The first official estimate of GDP growth in the third quarter will not come out until late October.

But there is a smorgasbord of other indicators of economic activity—in particular, data “scraped” from the internet—which occur at a higher frequency than official data are published. None of the observations is robust on its own. But together, they hint at how the British economy is doing after Brexit.

It is not all doom. Consumer spending seems to be holding up. OpenTable, a restaurant-booking website, showed a drop in reservations during the referendum, as people made time to vote or watch the coverage. After the next weekend, however, reservations were back to normal.

Shoppers have not been too affected, either. Sales at John Lewis, a department store, which has published weekly figures to July 9th, are up on previous years. The number of people entering shops, a decent proxy for retail spending, has not much changed since the referendum, according to data from Footfall, a consultancy. Supermarkets are not aggressively discounting, finds mySupermarket, a price-comparison site. Tesco, Britain’s biggest, had 23.7% of products on promotion on July 8th, down from 24.8% just before the referendum.

All this chimes with what economists predicted—that consumer spending would hold up. Over half of voters plumped for Brexit, after all, so they should be happy shoppers. An economic slowdown does not immediately pinch people’s pockets. Instead, the assumption was that investment would be whacked. Companies would put off big decisions on capital spending or recruitment, given the uncertainty about the future of the economy.

It looks a fair prediction. Firms already seem more reluctant to take on new staff. Data from Adzuna, a job-search website with over 1m listings, suggest that in the week to July 8th there were one-quarter fewer new jobs than in the first week of June. Part-time roles appear to have been particularly hit. Scotland, which was already near recession because of low oil prices, is suffering most.

While some Britons struggle to find new jobs, others may be losing theirs. A Bank of England paper from 2011 analysed Google as a window into the labour market. Searches for “jobseekers” (as in jobseekers’ allowance, an unemployment benefit) have historically been correlated with the unemployment rate. In the first fortnight in July, Britons searched for that word about 50% more frequently than in May. This suggests that unemployment is now 5.3%, not the official rate of 5% (last recorded for the three months to April).

Businesses are cutting investment, too. On Funding Circle, a peer-to-peer loans website for small firms, the volume of lending is about 10% lower so far in July than it was in the same month last year. The number of planning applications—for permission to expand premises, say—is another decent proxy for investment spending. Though there is a lag in registrations, a tally of applications in London boroughs in the week after Brexit currently stands at one-third below their level a year before.

The tail-off in planning may be linked to a slowdown in the housing market. Data scraped from Zoopla, a property website, suggest that of about 6,000 London properties listed from June 24th to July 11th, roughly 1,000 have had their price cut since the referendum. A survey by the Royal Institution of Chartered Surveyors published on July 14th, which accounts for the post-referendum period, shows a sharp fall in inquiries from homebuyers.

http://www.economist.com/news/britain/21702225-forget-financial-markets-evidence-mounting-real-economy-suffering

The thing that hit me was job offers dropping by a full 25 percent -- that can't be good.

Eilzel wrote:Eds that is a destructive attitude. Have you seen the kind of suffering that happens in countries where everything has fallen apart? And you will usually find governments don't care enough in those countries either.

Perhaps if people weren't so negative about country such reckless ideas would be less frequent. The UK needs improving of course, but it is still a haven compared to most countries in the world. Don't be so quick to codemn it just because you only ever read the bad news

Eilzel wrote:I wish that was the case in other countries

Still, for its problems, the UK is genuinely one of the best countries to live in (as in, out of around 200, it falls into probably the top 25)- the plaster as you call it, is doing a fantastic job

eddie wrote:

Eilzel wrote:I wish that was the case in other countries

Still, for its problems, the UK is genuinely one of the best countries to live in (as in, out of around 200, it falls into probably the top 25)- the plaster as you call it, is doing a fantastic job

Depends which part of the house you live in.

Eilzel wrote:At least in the UK you get to live in a house with two floors and a roof

Eilzel wrote:
At least in the UK you get to live in a house with two floors and a roof

WhoseYourWolfie wrote:

Eilzel wrote:
At least in the UK you get to live in a house with two floors and a roof

OVER here, there's usually enough land available, that decent size houses are often built over only one floor...  

WhoseYourWolfie wrote:

"Ignoramus"  ?!?

That's not nice..

Raggamuffin wrote:We have bungalows in the UK too. They're very popular with older people on account of them not having stairs, so they can be quite expensive.