UK economy shrinks for first time in almost seven years
The UK economy contracted in the second quarter for the first time in almost seven years amid rising Brexit uncertainties and weakening global growth.
Output fell 0.2 per cent in the three months to June, worse than the flat performance expected by economists and down from a 0.5 per cent expansion in the first quarter, according to data from the Office for National Statistics. Britain’s economy has not shrunk since the final three months of 2012.
“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,” said Rob Kent Smith, head of gross domestic product at the ONS.
Services provided the only positive contribution, but growth in the sector slowed to the weakest pace in three years and was not enough to offset the contraction in manufacturing. The production sector contracted by 1.4 per cent in the second quarter, the largest drag on growth, largely driven by a 2.3 per cent decline in manufacturing output.
The Bank of England expected no growth in the second quarter in its August inflation report, released last week.
In the quarter, the UK economy underperformed the eurozone, where output expanded by 0.2 per cent.
The data sent the pound back below $1.21 as it fell 0.4 per cent against the US dollar. It fell 0.3 per cent against the euro, nearing the two-year low it touched on Thursday at €1.0814. The pound has fallen more than 4.5 per cent against the dollar in July and August over fears Boris Johnson’s government is pushing the country towards a no-deal EU exit.
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