Brexit: UK economy suffers first contraction since 2012
Gross domestic product (GDP) fell at a quarterly rate of 0.2% in the second quarter
Canary Wharf and the City of London financial district. Year-on-year economic growth slid to 1.2 per cent from 1.8 per cent in the first quarter, Britain’s office for national statistics said, its weakest since the start of 2018.
Britain’s economy shrank for the first time since 2012 in the second quarter, an unexpectedly severe hangover from a pre-Brexit stockpiling boost in early 2019 and boding poorly as the country prepares to leave the EU on October 31st.
Gross domestic product fell at a quarterly rate of 0.2 per cent in the three months to June, below all forecasts in a Reuters poll of economists that had pointed to a flat reading.
Year-on-year economic growth slid to 1.2 per cent from 1.8 per cent in the first quarter, Britain’s office for national statistics said, its weakest since the start of 2018.
Annual growth in June alone was the weakest since August 2013 at 1 per cent. With prime minister Boris Johnson’s government committed to leaving the European Union on October 31st, regardless of whether he can secure a new transition deal to avoid trade disruption, the outlook for the remainder of 2019 is especially uncertain.
The world economy has also slowed due largely to a trade conflict between the US and China.
The Bank of England last week predicted that growth will only stage a limited pick-up to a quarterly rate of 0.3 per cent during the current quarter, and that growth for the year as a whole will drop to 1.3 per cent.
Previous data had already shown a collapse in manufacturing output in April as car manufacturers brought forward their annual summer shutdowns to follow the original March 29th Brexit deadline that was postponed to October 31st. But June manufacturing data was also unexpectedly poor and output for the quarter contracted at the fastest rate since early 2009, when Britain was mired in recession.
“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,” ONS statistician Rob Kent Smith said.
Private-sector business surveys have shown the manufacturing and construction sectors both contracted in July, while the larger services sector eked out only modest growth.
Britain’s economy has slowed since June 2016’s vote to leave the EU, with annual growth rates dropping from more than 2 per cent before the referendum to expand by 1.4 per centlast year.
Friday’s data showed business investment contracted 0.5 per cent in the second quarter of the year versus economists’ expectations of a 0.3 per cent fall.
Household spending, which has been much more resilient than business investment, due to falling unemployment and rising wages, rose 0.5 per cent on the quarter.
Trade figures and its contribution to GDP were distorted erratic flows of non-monetary gold and also showed the effect of businesses building up fewer stocks than in the first quarter of the year when they were readying for Brexit.