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Chance of rate cut increases as GDP falls

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UK GDP contracted by 0.2% in Q2 following growth of 0.5% in the first quarter, according to the latest ONS statistics. Its figures show that rolling three-month growth - comparing quarterly GDP with the previous three-month period - contracted for the first time since Q4 2012. Rolling three-month growth was negative 0.2% in June, continuing the steady decline that followed the relatively strong growth seen earlier in the year.

Monthly GDP growth was flat in June, as services showed no growth for the fourth month in a row. The production sector contracted by 1.4% in Q2, providing the largest downward contribution to GDP growth; the fall was driven by a sharp decline in manufacturing output, reflective of increased volatility in the first half of 2019.

Additionally, month-on-month GDP growth in April and May have both been revised down by 0.1 percentage points each. GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter. 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. “The trade deficit narrowed markedly, as imports fell following a sharp rise in the first quarter ahead of the UK’s original departure date from the EU.”

Posted by MMB Finance Swindon on 12 August 2019