Britain on the cusp of recession

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Sun, 2019-08-11 23:31

LONDON: Britain’s economy unexpectedly shrank in the second
quarter of the year on Brexit turmoil, official data showed,
placing the country on the verge of recession and sending the pound
tumbling to a 2.5-year low.
Gross domestic product (GDP) fell 0.2 percent in the April-June
period, the first time the economy has contracted in almost seven
years, the Office for National Statistics (ONS) said in a
statement, blaming a dramatic slump in the construction and
manufacturing sectors.
The data, which was worse than market expectations for zero growth
and also reflects global economic strains, sent the pound diving to
$1.2056 — the lowest level since early 2017.
Another contraction in the current third quarter would put Britain
in an official recession, ahead of the nation’s expected
withdrawal from the EU at the end of October.
“The latest data reveal an economy in decline and skirting with
recession as headwinds from slower global economic growth are
exacerbated by Brexit-related paralysis,” said IHS Markit
economist Chris Williamson.
The result contrasted with 0.5-percent expansion in the first
quarter, when activity was boosted by companies stockpiling ahead
of Brexit.
Output was buoyed in the first three months of 2019 because Britain
had initially been scheduled to leave the EU at the end of
March.
“GDP contracted in the second quarter for the first time since
2012 after robust growth in the first quarter,” said Rob Kent
Smith, ONS head of GDP.
“Manufacturing output fell back after a strong start to the year,
with production brought forward ahead of the UK’s original
departure date from the EU.
“The construction sector also weakened after a buoyant beginning
to the year, while the often-dominant service sector delivered
virtually no growth at all,” he added.
British Prime Minister Boris Johnson replaced Theresa May after
winning the Conservatives’ leadership contest on a pledge to take
Britain out of the bloc on Oct. 31 with or without a divorce
deal.

The latest data reveal an economy in decline and skirting with
recession as headwinds from slower global economic growth are
exacerbated by Brexit-related paralysis

Chris Williamson, IHS Markit economist

Brexiteer Johnson, a pivotal “Leave” campaigner in the 2016
EU exit referendum, has repeatedly insisted that Britain can make
an economic success of Brexit.
Chancellor of the Exchequer Sajid Javid on Friday said that the
global economy was slowing, but highlighted other recent positive
data for the UK.
“This is a challenging period across the global economy, with
growth slowing in many countries,” said Javid.
“But the fundamentals of the British economy are strong — wages
are growing, employment is at a record high and we’re forecast to
grow faster than Germany, Italy and Japan this year,” he
added.
“The government is determined to provide certainty to people and
businesses on Brexit — that’s why we are clear that the UK is
leaving the EU on Oct. 31.”
The government’s official forecaster last month warned that
Britain would slide into a year-long recession should it leave the
EU without a deal.
Bank of England Gov. Mark Carney recently warned that a no-deal
Brexit could undermine entire sectors of the economy such as the
car industry and farming.
“The latest look at the UK economy makes for pretty grim
viewing,” XTB analyst David Cheetham said in reference to
Friday’s data.
“Given the growing threat of a no-deal Brexit that looms
menacingly overhead, it would not be at all surprising if the
current quarter also shows a contraction — therefore meeting the
standard definition of a recession.”
May stepped down after failing to get her EU-divorce deal through
parliament and being forced to delay Brexit twice.

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Source: FS – All-News-Economy
Britain on the cusp of recession