UK one quarter of negative GDP away from recession
UK gross domestic product (GDP) contracted in the second quarter for the first time since 2012, the Office for National Statistics said in its latest report, meaning the UK is only one negative quarter away from a recession.
The GDP monthly estimate for June, published today (9 August), shows that GDP shrunk by 0.2% in Q2 following the strong growth seen in Q1, largely due to a pull back in manufacturing output, although the other two main sectors of the economy - services and construction - also suffered.
The slowdown means the annual growth rate stands at 1.2% and was notably worse than the Bank of England's forecast in its quarterly inflation report.
Head of GDP Rob Kent-Smith said: "GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter.
"Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK's original departure date from the EU.
"The construction sector also weakened after a buoyant beginning to the year, while the often-dominant service sector delivered virtually no growth at all.
"The trade deficit narrowed markedly, as imports fell following a sharp rise in the first quarter ahead of the UK's original departure date from the EU."
While the services sector was the only positive contributor to GDP growth Q2, growth in services was still subdued at 0.1%, the weakest quarterly growth in this sector since the second quarter of 2016, when services output also fell by 0.1%.
Reaction
Close Brothers Asset Management chief investment officer Nancy Curtin commented: "There's no denying that the UK's GDP figures are a cause for concern. However, the jury's still out on the extent of inventory built-up.
"We are likely to see a similar phenomenon ahead of October, as firms look to mitigate supply chain disruption in the case of a no-deal Brexit, which may provide short-term support for GDP.
"On the whole though, there's no doubt the UK is struggling. The services and automotive sectors have decelerated, construction and manufacturing have declined, and business activity has stalled. The impact of Brexit is no doubt exacerbated by the wider global slowdown."
She added: "The Monetary Policy Committee has already warned on Britain's growth forecasts, and a rate cut this side of Christmas is looking ever more likely under in a no-deal Brexit scenario.
"On the bright side, the prime minister's plans for 'boosterism' - government spending to support the UK economy - could serve as a counterbalance to recent stagnation. With uncertainty over Brexit still high, however, the outcome for growth remains uncertain."
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