UK GDP contracts by 0.2% in Q2

The economy of UK contracted at a quarterly rate of 0.2% in the second quarter, the Office for National Statistics (ONS) said on Monday.

According to the ONS, the services sector continued to provide the main positive contribution to overall GDP growth, but slowed to its weakest rate in three years, alongside falls in the production and construction sectors in Q2.

With an upwardly revised rise of 0.6 percent in the first quarter, the British GDP has been volatile through the first half-year of 2019.

The ONS noted that the volatility largely reflecting changes in the timing of activity related to Britain’s original planned exit date from the European Union in late March.

“There is evidence that stockpiling and the change in timing of activity was taking place in the first quarter of the year, which likely provided a boost to GDP, with the latest figures suggesting that these increased stock levels were partly run down in Q2”, the ONS said.

“Furthermore, it was also reported that a number of car manufacturers had brought forward their annual shutdowns to April as part of Brexit-related contingency planning.”

While British industry and investment wilted in the escalating Brexit crisis, household spending increased at a quarterly rate of 0.4%, marking the fastest growth in a year.

The new ONS data also showed Britain’s households have been net lenders to the economy rather than net borrowers ever since the second quarter of 2017. Previous data had shown households were net borrowers non-stop since late 2016.

Britain’s economy has slowed since the Brexit referendum, and now faces increased headwinds from trade tensions between the United States and China and a slowdown in Europe.

While most economists think the economy recovered some of its lost ground in the third quarter, the outlook further ahead is clouded by the global slowdown and the Brexit crisis.

A Lloyds Bank survey on Monday showed pessimism among businesses about the economic outlook rose in September to its highest since June 2016, the month of the Brexit vote.