E UK Economy Expanded In Q1, But Brexit Fears Cloud Outlook

“Despite a robust start to the year, the EY Item Club, the only forecasting group to use the Treasury’s model of the economy, said (UK) GDP growth had been artificially high due to an unprecedented upswing in stockpiling by firms bracing for a disruptive no-deal Brexit. The forecasting group downgraded its growth projections for the UK to 1.3% for 2019 and 1.5% for 2020, warning the stronger than anticipated performance at the start of 2019 was likely a “false dawn” for Britain. The economy grew by 1.4% in 2018.” (Richard Partington, Brexit will slow the UK economy for the rest of 2019, April 29, 2019)

The irony of all ironies, the UK economy gained some momentum in the first quarter of 2019 as government spending edged up and fixed investment rebounded, both clearly responding to worries about a possible no-deal Brexit.

Moreover, consumer spending also improved, supported by solid wage gains and a tight labor market.

As well, there was quite a surge in imports in Q1, also reflecting stockpiling against a Brexit risk.

The political outlook is very cloudy now, with Theresa May’s resignation and the late October deadline for a Brexit decision.

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Beating Buffett 2 months ago Member's comment

Good read as usual.