UK economy slows in second quarter - ONS
The UK economy contracted in the second quarter, official data confirmed on Monday, weighed down by the manufacturing sector.
The Office for National Statistics said gross domestic product in volume terms was estimated to have fallen by 0.2% in the three months to June. That was in line with the consensus and matched the previous estimate.
However, the ONS also said that it had revised quarter-on-quarter growth in the first three months of the year upwards, to 0.6% from 0.5%, because of Brexit stockpiling. That meant year-on-year growth was also revised upwards, to 1.3% from 1.2%.
Rob Kent-Smith, head of GDP at the ONS, said: "Our GDP figures published today include newly introduced methods and data sources, giving significantly improved estimates of the changing UK economy.
"Headline GDP remained unrevised in the latest quarter with the economy contracting, partly due to a fall back in manufacturing following the UK’s originally planned EU departure date."
Services provided the only positive contribution in the output approach to GDP in the second quarter, although it saw growth slow, to 0.1%.
The ONS upwardly revised government spending estimates - most notable in health and education - by 0.4 percentage points to 1.1%. Household spending rose 0.4% quarter-on-quarter while the saving rate rose to 6.8% from 6.4%.
Kent-Smith added: "Improved data sources and new methods mean our estimates now show households have been lenders in recent quarters. People have been donating less to charity than previously thought, as well as receiving more money from renting out homes."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The drop in GDP in the second quarter was driven solely by the unwinding of the boost from no-deal preparations in the first quarter.
"Collectively, the net trade, inventories and valuables components of GDP subtracted 0.8 percentage points from quarter on quarter GDP growth in the second quarter. An erratic-looking 3.6% quarter-on-quarter drop in government investment subtracted a further 0.1 percentage points from growth.
"Business investment has been weighed down by Brexit uncertainly, though the 0.4% fall is modest by historical standards, and only subtracted 0.04 percentage points from overall GDP growth. Households and the government, meanwhile, are doing the heavy lifting."
Naeem Aslam, chief markets analyst at Think Markets, said: "The UK’s economy is under the terrible effects of Brexit, and its GDP data stink. Having said this, the actual number matched the estimates and given that the revised reading wasn’t changed, there won’t be any meaningful moves in sterling.
"But overall, traders and investors are desperate for the Brexit uncertainty to disappear, because borrowers are not ready to take any risk."