Decent GDP growth in Q1 likely to be false dawnChristian Fernsby ▼ | May 6, 2019
The EY ITEM Club Spring Forecast has cut its GDP growth projections to 1.3% for 2019 (from 1.5% in the EY ITEM Club Winter Forecast) and 1.5% for 2020 (down from 1.7%).
Britain The strong start to the year is expected to overstate the economy’s strength
A weaker global economic environment has also impacted the UK’s growth outlook.
The strong start to the year is expected to overstate the economy’s underlying strength, says the EY ITEM Club.
Projected GDP growth of at least 0.4% quarter-on-quarter (q/q) in Q1 2019 was almost certainly boosted by stockpiling in the manufacturing sector, and to a lesser extent by consumers, amid concerns that a disruptive “no-deal” Brexit could have occurred in late-March.
Consumers may have also brought forward some purchases in Q1 in case a disruptive Brexit occurred in late-March causing sterling to fall sharply, pushing up prices.
With Brexit being delayed, some unwinding of this stockpiling threatens to weigh down on economic activity in the near term, along with other challenging factors.
The EY ITEM Club expects growth to be limited to 0.2% q/q in both Q2 and Q3 2019.
In particular, business investment is likely to remain under serious pressure, having almost certainly contracted in Q1 2019 for a fifth successive quarter (the weakest performance since the 2008/9 downturn). ■