Second-quarter GDP figures, PwC comments

Aug 09, 2019

Commenting on the second-quarter's GDP figures, PwC senior economist Mike Jakeman said:

"In April-June the economy shrank for the first time on a quarterly basis since the end of 2012. This is partly a function of the fact that growth was artificially inflated in the first quarter of the year by stockbuilding in preparation for a potential Brexit at the end of March. This meant that demand had been pulled forward and left April-June looking bare. 

However, there is also little doubt that the economy is stalling, regardless of the volatility in the data. Household spending continued to expand at a healthy rate, of 0.5% quarter on quarter, but beyond this, the economy was weak. Monthly data for June showed no growth at all, which suggests that the economy is entering the third quarter with no momentum. The possibility of a recession - defined as two consecutive quarters where the economy shrinks - is now very real. 

There are two major factors behind the deterioration in the economy: Brexit-related uncertainty - to which households remain relatively immune but which has curtailed business investment for more than a year - and a weakening global economy, which is being dragged down by trade and currency conflicts and a prolonged soft period in the manufacturing sector. The fact that both of these problems have continued, or even worsened, so far in the third quarter leaves the UK economy on a knife-edge ahead of the government's planned Brexit date of October 31st."

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