The Bank of England (BoE) has reduced its growth forecast for the UK economy amid growing concerns over global trade tensions and fears of a no-deal Brexit.
In its latest policy statement, the BoE said it now expects economic growth to be flat during the second quarter of this year, a downgrade from the 0.2% quarterly growth rate it predicted in May. This reduction partly reflects an anticipated hangover from the rapid level of stockpiling that was witnessed in the run-up to the original Brexit deadline in March.
However, the BoE also noted a darkening outlook for the world economy and suggested that downside risks to growth have increased. Specifically, an intensification of global trade tensions and growing fears of a no-deal Brexit are major areas of concern. The BoE also highlighted a growing disconnect between the smooth Brexit underpinning its forecast and a potentially much more chaotic one that markets increasingly appear to be predicting.
Meanwhile, the latest economic growth data released by the Office for National Statistics (ONS) shows that the UK economy shrank by 0.4% in April compared to the previous month. This sharp contraction reflects a dramatic decline in car production due to factory shutdowns that had originally been designed to cope with disruption from a March Brexit, as well as a general easing of stockpiling right across the manufacturing sector.
In the three-month period from February to April, economic growth slowed to 0.3% from the 0.5% growth rate recorded in the first quarter of 2019. This was a sharper deceleration than most economists had been predicting and would appear to suggest that underlying growth is sluggish. This has led some economists to suggest that the UK is likely to experience a relatively subdued growth profile over the rest of this year.