U.K. economic growth rebounds strong in May, likely to avoid negative growth in Q2

The latest U.K. activity trends indicated that the economy recovered strongly in the month of May, recording an economic growth of 0.3 percent sequentially, partially reversing the sharp fall in April, when economic activity dropped 0.4 percent. The main driver for the rebound was a turnaround in industrial activity, which grew 1.4 percent sequentially, reflecting a 24.2 percent sequential rise in car production.

Auto manufacturers returned to more-normal working patterns having brought forward their seasonal shutdowns from August to April in order to cope with any disruption that might have occurred from a possible 29th March Brexit.

Ahead of the release, a GDO outturn of 0.3 percent had been expected to result in the rolling 3 month-on-3 month GDP growth rate decelerating to 0.1 percent. Nevertheless, courtesy of a 0.2 percentage point revision to March GDP, growth in the three months to May is now seen to have only decelerated modestly to 0.3 percent, compared to 0.4 percent in the three months to April, noted Lloyds Bank in a research report.

This still suggests that the U.K.’s growth momentum has eased in recent months. However, this better momentum should also ease fears over an imminent recession in the U.K. Mechanically, even if the economy flatlined in June, that should guarantee that the U.K. economy avoided recording a negative quarter of GDP in the second quarter.

“More broadly, even if we were to assume that the economy recorded no growth in each of the three months of Q3, that would still deliver a positive growth in Q3 overall (+0.1 percent)”, added Lloyds Bank.

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