Political consequences

Well, just another quiet month in global politics and economics with not much to analyse or discuss.

I jest of course but these are interesting times and, while the consequences of these changes are the subject of much speculation, their effects on the UK economy are likely to be longer term. This is not to underplay the effect of changing global trade conditions driven by a more protectionist US under Donald Trump or a UK outside the EU single market, but the timescales cannot be predicted with much accuracy.

The slow burn of the radical changes in Trump’s economic vision and the more hardline advocates of Brexit will manifest themselves over the next two to five years rather than having the immediate impact some predicted. It is still likely that business investment will slow in the UK while the uncertainty around Brexit exists but, as long as consumers feel confident, the level of aggregate demand in the economy should continue to grow. This view is broadly supported by figures from the Office for National Statistics. These showed construction output in Q3 2016 was 1.1% lower than in Q2 2016, which, while not positive, is far from an indication of an industry in steep decline. Comparing the latest quarter’s figures with those in the same quarter of 2015 shows that output increased by 0.1%, backing up the view of an industry that is still growing over the longer term. Private housing remains the biggest growth sector, increasing by 10.8% in Q3 2016 compared with Q3 2015. Private commercial is also well placed, growing by 4.5% in the same period. However, the infrastructure sector was 7.7% below its 2015 level - more gloomy news.

However, the question is whether these figures could have been higher had political decisions been different. That is the $64,000 question and, in truth, not one that keeps many politicians awake at night. They tend to become concerned when minus signs appear. That is not on the cards yet, but will the incremental effects of the change to less open economies start to appear in 2017? Watch this space.

Michael Dall is an economist at Barbour ABI