Economy

United Kingdom economy declines for the first time since 2012

United Kingdom economy declines for the first time since 2012”

The decline is set to raise alarm that Brexit uncertainty is increasingly weighing on the economy.

The data, which was worse than market expectations for zero growth and also reflects global economic strains, sent the pound diving to $1.2056 - the lowest level since early 2017. Annual growth in June alone was the weakest since August 2013 at 1.0 percent. Most analysts expected the economy to flat-line.

According to the ONS, the volatility in the first half of 2019 largely reflected changes in the timing of activity related to the UK's original planned Brexit date in late-March.

Euro traders are increasingly concerned about the likelihood of a contraction in the Eurozone's economy in the second quarter.

"The trade deficit narrowed markedly, as imports fell following a sharp rise in the first quarter ahead of the original departure date from the European Union".

The technical definition of a recession is two consecutive quarters of negative economic growth.

The fact that the overall economy performed worse than anticipated is likely to increase concern about Brexit's corrosive effect on the economy. Business investment, which has been historically weak since the country voted in June 2016 to leave the European Union, weakened further in the second quarter, contracting by 0.5%. He also listed positive economic data, from the U.K.'s low unemployment rate and wage growth to predictions that the country will resume an economic expansion.

The contraction comes amid rising fears that Britain could crash out of the European Union on October 31 without a deal as negotiations with the EU remain at an impasse.

Many investors say a no-deal Brexit would tip Brexit into a recession, weaken London's position as an worldwide financial center and send shock waves through the world economy. Mr Tombs said the market now sees a 70% chance of an interest rate cut in January, when Mark Carney is due to leave as the Bank of England's governor.

The finance minister-in-waiting for the opposition Labour Party, John McDonnell, said: "The Tories' Brexit bungling, including Boris Johnson now taking us toward no-deal, is breaking the economy".

U.K. Chancellor of the Exchequer Sajid Javid, who has held the post since Johnson's election, dismissed fears of a recession and said he does not "at all" expect growth to decline for a second quarter.

But June manufacturing data was also unexpectedly poor and output for the quarter contracted at the fastest rate since early 2009, when Britain was mired in recession. And with all the talk of a no-deal Brexit again, firms could start to build up their stocks again. It's because the fundamentals are strong, that's the first thing. Johnson's predecessor May stepped down last month after failing to get her EU-divorce deal through parliament and being forced to delay Brexit twice.

"You could reasonably expect that it will carry on falling, potentially to parity with the dollar", he told Business Insider.



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