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Updated 09:18 26/10/20

What's really going on with the economy

By Daryl Jackson, News Editor

30 Jan 2017

The UK economy is not in recession. That much we know. But what about its component parts?

Did you know, for instance, that for all the enthusiasm about Britain's motor industry, car manufacturing actually dropped into recession in the wake of the Brexit vote?

Did you know that the domestic workers sector (meaning cleaners, nannies and anyone else who works as an employee in a home) is booming?

Or that the postal and courier sector is growing faster than almost any other part of the UK economy?

Did you realise that Britain's economic growth is actually by some measures now the least imbalanced in more than a decade?

I presume not, and that comes down to the fact that these days few economists like to dirty their fingers with deep-dive statistical analysis.

Today, for the sake of Sky News readers, I will make an exception.

Gross domestic product figures, such as the ones that came out last week (confirming that Britain as a whole was not in recession), are - as the name suggests - an indication of how the entire economy is doing.

But the economy comprises tens of millions of individuals and millions of companies.

It includes no fewer than 114 sub-sectors, according to the Office for National Statistics, from accommodation to wood products.

Now, save for a glance at the biggest categories of sectors (manufacturing, services and construction) most economists pay little attention to the performance of the smaller parts - the quarrying industry, the veterinary sector.

That's fair enough - after all, their job is to get a sense of overall trends, which in turn influence Bank of England and Treasury decisions.

However, given a bit of time and a bit of time in front of a spreadsheet, it turns out anyone can dive deep into the GDP figures and get a sense of how different parts of Britain PLC are faring.

And it turns out that in the final quarter of last year, while the overall economy was not in recession (the technical definition for which is two successive quarters of contraction), some 17 of the ONS's 114 sub-sectors were.

The bakery sector, the alcohol sector, the tobacco sector, which has been in permanent decline for decades and is now a quarter of the size it was in 1990.

The ferry sector has been in recession for years. And while motor manufacturers were in recession, motor retail grew by 2% in the quarter.

Now, one shouldn't get too carried away by these trends - after all, some sectors are notoriously volatile.

Many manufacturers (including car makers) shut down their factories seasonally, so you'll always see some big ups and downs in places as each quarter goes by.

They don't always imply economic problems. Some sectors are affected by big orders from time to time; so, for instance, weapons and ammunition manufacturers saw a sharp decline of 17.2% in the most recent quarter, but that followed a 14.4% rise in Q3 2016.

Moreover, some sectors are bigger than others. One should be rightly concerned when the entire services sector, which accounts for about 80% of total UK income drops into recession (the last time it did was in 2008) but most of us need not lose too much sleep over the fact that the "leather and related products" is in recession - after all, it accounts for precisely 0.03% of UK economic output.

Nonetheless, there are some interesting trends one can notice by glancing across the sectors and sub-sectors of the UK economy.

The first thing you can get a sense of is how balanced the growth is across the economy - and here there are some surprises too.

For it so happens that since comparable figures began in 1990 there has not been a single quarter when the entire economy - every sector and sub-sector - was growing.

In fact, on average, 31 sub-sectors of Britain's 114 are in recession in a given quarter. So the fact that only 17 were in recession as of the latest figures is actually pretty outstanding.

In fact, by this measure the final quarter of 2016 saw the most balanced UK growth in more than a decade (the last time just 17 sectors were in recession was in Q3 2005; the last time fewer were in recession was Q1 2005, when the tally relevant total was 15).

Now of course, this is only one perspective on the UK economy. But it is a perspective few experts spend much time scrutinising.

But given the UK is so frequently described as imbalanced; given so many politicians have promised to try to make it more functional in the future, perhaps they should spend a bit of time focusing not just on the big picture but also looking into its nooks and crannies too.

By Ed Conway, Sky News Economics Editor.

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