UK growth set to rebound as summer defrosts economy

UK economic growth is expected to have rebounded in the second quarter, with analysts forecasting sunnier news from official figures released this week.

Sunday, 5th August 2018, 8:23 pm
Updated Saturday, 1st September 2018, 10:08 am
Month-on-month outturns for GDP in April and May were strong

Economists are forecasting that gross domestic product (GDP) growth returned to 0.4% between April and June, according to consensus estimates.

It comes after growth slumping to 0.2% amid frosty weather in the first three months of the year.

Andrew Goodwin, the lead UK economist at Oxford Economics, said: “The month-on-month outturns for GDP in April and May were strong, at 0.2% and 0.3% respectively, largely because of a rebound after March’s snow-related disruption and a couple of very strong months for retail sales.

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“But, with retail sales edging down in June, the service sector is likely to provide less impetus and ensure a weaker outturn for monthly GDP growth of around 0.1%.

“However, this would still generate quarterly growth of 0.4% for Q2 as a whole.”

Analysts at Investec are also expecting that June GDP growth - marking the last month of the quarter - will have struggled to maintain the pace seen in May when the economy received a “double boost” from warm weather and the royal wedding.

“Principally, the expansion in construction output is almost certain to have moderated from May’s two-year high,” Investec analysts led by Victoria Clarke said.

“The services sector may also have seen a more moderate pace of growth, as we have already seen in the retail sales figures.

“In contrast, we expect activity to pick up in the industrial sector.”

The Bank of England - which days ago raised interest rates has made predictions in line with consensus for the second quarter.

It comes amid a resilient jobs market, and wage growth starts to outstrip inflation, although recent readings have been weaker than expected.

Retail sales have also bounced back, thanks in part to the recent heatwave spurring on shoppers.

While growth is not back up to pre-crisis levels, Governor Mark Carney has said previously that Britain’s economy has a “new, lower speed limit”.

However, Brexit negotiations and uncertainty over the deal - and indeed, any deal - being in place by the UK’s withdrawal from the EU next March is still casting a cloud over the economy going forward.

The figures will be released by the Office for National Statistics (ONS) on Friday.

It will be the first quarterly reading from the ONS since the statistics agency overhauled its GDP releases to provide rolling monthly estimates of economic growth earlier this year.

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