UK GDP grows 0.3% in May as car production rebounds from pre-Brexit shutdowns

Economy gets temporary boost from steep rise in car production after slump in April as plants were closed in anticipation of Brexit chaos

Olesya Dmitracova
Economics and Business Editor
Wednesday 10 July 2019 10:40 BST
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Britain’s economy expanded by 0.3 per cent in May compared with the previous month, helped by a sharp rise in car manufacturing, according to new official data.

The growth in GDP reversed only some of the 0.4 per cent slump recorded in April. Based on poor data from timelier business surveys, a number of economists think the economy contracted for the first time in seven years in the second quarter, and the latest figures from the Office for National Statistics did not change that view.

The May car production figures were flattered by a plunge in April when many plants had no choice but to go ahead with planned closures ahead of the previous Brexit deadline of 29 March.

A longer-term and less-volatile measure of GDP showed that, in the three months to May, economic output rose 0.3 per cent compared with the three months ending in February. That marked a deterioration from the first quarter when growth stood at 0.5 per cent.

“Although there was a modest rally in GDP growth between April and May, the continued slowdown on the underlying three-month measure is further evidence that the UK economy is faltering under the weight of relentless Brexit uncertainty and tougher global economic conditions,” said Suren Thiru, economist at the British Chambers of Commerce.

“Manufacturing activity picked up in May as car production reopened, but the longer-term measures point to a sector under pressure from the running down of excess stock, tougher global trading conditions and rising upfront costs.”

Consistent with a weakening economy, output in the dominant services sector was stagnant in May after a tick-up of 0.1 per cent in April. There was better news on the much smaller construction sector where output increased by 0.6 per cent after previous falls.

“There’s clearly a risk of a recession – two consecutive quarterly contractions – but we’re not expecting one,” said Paul Dales, economist at Capital Economics.

“Much of the probable weakness in the second quarter is because the risk of a no deal on 29 March meant that activity was shifted from the second quarter into the first quarter,” he explained.

Separate official figures also released on Wednesday showed that Britain’s trade deficit narrowed in May due mainly to a smaller deficit in goods trade.

Mr Dales said the gap in goods narrowed “simply because the surge in imports ahead of the original Brexit deadline of 29 March has been reversed”.

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