The second successive monthly fall in UK GDP in May confirms that the strong growth of 0.7% reported in the first quarter was just a flash in the pan.
Growth in the second quarter is likely to be only just the right side of zero – and negative in terms of GDP per head.
Nonetheless, just as the first quarter GDP data overstated the strength of the economy, the second quarter numbers are likely to exaggerate the weakness.
A large part of the slowdown is simply the reversal of the temporary factors that flattered growth earlier in the year, notably activity brought forward to beat Trump’s tariffs and the changes to UK stamp duty.
April also saw the new shocks from the increases in employment costs and higher energy bills, which are continuing to weigh on activity. But the more timely business surveys suggest that confidence is at least stabilising and may be recovering a little.
The upshot is that underlying growth is probably around 0.2-0.3% a quarter and an outright recession should be avoided. But this would still be well short of the numbers required to fix the public finances. Another negative shock in the Autumn Budget could easily be enough to tip the economy over the edge again.
