United Kingdom: The economy contracts sharply in April amid plunging car production
According to monthly GDP data released by the Office for National Statistics (ONS), economic activity fell 0.4% in April over the prior month in seasonally-adjusted terms, down from March’s 0.1% contraction. In the February-April period, growth clocked 0.3%, down from the 0.5% expansion in January-March. Figures for both April and February-April were weaker than markets expected.
April’s poor showing was driven by an ebbing impact from stockpiling and lower car production, as several car manufacturers temporarily closed their plants in anticipation of the UK’s exit from the EU at end-March. However, car production should rebound in May, supporting the economy.
Looking beyond the current Brexit-driven volatility of the monthly data, James Smith, an economist at ING, commented: “The wider growth story continues to look fairly bleak. While consumer spending may be a little stronger given the modest improvement in real wage growth, investment is likely to continue falling over the summer as Brexit uncertainty weighs on decision-making.”