wednesday, 10 july of 2019

Economy

UK economy returns to growth but slowdown fears persist

The economygrew 0.3% from the month before, after declining 0.4% in April, according tothe Office for National Statistics (ONS).

Growth forthe three months to May was 0.3%, with all sectors showing growth.

Buteconomists say that June's growth figures will have to be strong to avoidcontraction in the second quarter.

A partialrecovery in car production, which had fallen sharply in April, was the mainreason for the economy's upturn in May, said Rob Kent-Smith, head of GDP at theONS.

Factoryshutdowns designed to cope with disruption from a March Brexit had slashed UKcar production in April by nearly half.

However,despite this rebound, the levels of output in the car industry are below thoseseen in the months leading up to April 2019, the ONS said.

"GDPgrew moderately in the latest three months, with IT, communications and retailshowing strength. Despite this, there has been a longer-term slowdown in theoften-dominant services sector since summer 2018," Mr Kent-Smith added.

In May,growth in services was flat, following growth of 0.1% in April.

Analysis

FaisalIslam, economics editor

A return towork in car factories that shut down in preparation for a no-deal Brexit drovea return to growth in the economy in May of 0.3%. But that rise did not make upfor all the fall in the previous month.

Monthlyfigures are volatile and should be taken with a pinch of salt. However, againsta backdrop of a marked softening in a slew of surveys of manufacturing,services and retail, there is an indication of an economy stalling and possiblycontracting in the second quarter that has just ended, between April and June.

In thethree months till May, however, growth was higher than expected because of abetter March than had been previously calculated.

The impactof stockpiling, though, can clearly be seen in the big economic figures.Sterling has fallen more than 5% in recent weeks against the world's threemajor currencies, on expectation of lower interest rates for longer, politicaluncertainty and rising expectations of a no-deal Brexit.

BenBrettell, senior economist at Hargreaves Lansdown, said the latest figures suggestedthe economy grew overall in the second quarter, although probably at a muchslower rate than the 0.5% recorded in the January-to-March period.

Thosesecond-quarter figures, covering April to June, are due to be released on 9August.

"Stormclouds look to be gathering over the UK economy, as consumers and businessremain hamstrung by Brexit uncertainty," he added.

Last month,the Bank of England said it expected economic growth to be flat in the secondquarter of the year.

(Publishedby,BBC, July 2019)

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