Monday 26 August 2019

Signs the UK economy shrank during April

Out and about: Conservative leadership contender Boris Johnson meets the public. Photo: PA
Out and about: Conservative leadership contender Boris Johnson meets the public. Photo: PA

William Schomberg and David Milliken

The UK economy has lost momentum and might have shrunk in the second quarter of 2019, according to data that showed the double impact of Brexit and the slowdown in the global economy.

Manufacturers had their worst month in more than six years and consumers increased their borrowing at the slowest pace since 2014.

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The value of sterling fell against both dollar and euro after the data was published.

Howard Archer, an economist with EY Item Club, a forecasting group, estimated that the UK's economy contracted by 0.2pc in the April-June period. The Bank of England last month cut its forecast for economic growth in the second quarter to zero.

That largely reflected an unwinding of the rush by many factories to get ready for the original Brexit deadline, which has now been delayed until October 31.

But economists said yesterday's manufacturing purchasing managers' index showed how hard Britain's factories were also being hit by the slowdown in the world economy caused by the trade skirmishes between the United States and China.

The overall PMI slumped to 48.0 in June from May's 49.4, well below the average forecast in a Reuters poll of economists and its lowest reading since February 2013.

Export demand dropped for a third month as manufacturers around the world lost confidence.

Allan Monks, an economist at JP Morgan, said the weak PMI survey challenged his view that manufacturing growth would rebound at the start of the third quarter.

Separate data from the Bank of England also published yesterday showed lending to British consumers - whose spending has helped the economy cope with the Brexit crisis - rose at its weakest annual pace in more than five years during May.

The BoE's data also showed the weakest increase since April 2017 in net mortgage lending.

Reuters

Irish Independent

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