Britain’s economic growth set to stagnate in second quarter

Britain’s economic growth set to stagnate in second quarter

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British economic growth forecast downgrade.

Britain’s economic growth is expected to have stagnated in the second quarter, as the manufacturing sector boost wears off while construction declines.

Economists believe that gross domestic product (GDP) growth will be flat in the three months to June.

It comes after growth accelerated to 0.5% in the first quarter, driven by the highest quarterly pick-up in manufacturing since the 1980s as the original Brexit deadline loomed.

With the UK’s departure from the bloc now rescheduled for October, companies which spent the first three months of the year stockpiling are set to use up their stores before building up new reserves.

However, the industry will also get a boost from a recovery in car production.

Although several car plants shifted their annual shutdowns to April in anticipation of Brexit disruption, putting a halt to growth at the start of the quarter, production bounced back in May and is expected to have kept going in June.

Samuel Tombs, chief economist at Pantheon Macroeconomics, said this would last for the rest of the summer.

“The official, seasonally adjusted measure of output will surge over the coming months, as plants will stay open through the summer, rather than close as usual,” he said.

Meanwhile, services are set to be almost flat, with Mr Tombs pencilling in a 0.1% rise for the sector despite a rise in retail sales.

Construction, which is one of the most volatile sectors, is expected to be lower in the three months to June. However it only accounts for a relatively small slice of GDP, meaning its impact will be limited.

Economist predictions are in line with the Bank of England’s forecasts, after it confirmed last week that it expects GDP to flatline in the second quarter.

The Bank upped its UK growth outlook to 2.1% in 2021, though it admitted its forecasts were heavily skewed by financial markets now pencilling in a rate cut to 0.5% in the first half of 2020 as they see a 50/50 chance of a no-deal Brexit.

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