Newly released statistics show that before the Brexit vote the UK’s economy grew fairly robustly.
But at the same time we learned British retailers suffered their sharpest fall in sales in four years after last month’s vote to leave the European Union.
Between April and June gross domestic product rose by a better than expected 0.6 percent quarter-on-quarter, up from 0.4 percent in the first three months of the year, the Office for National Statistics said based on preliminary data.
GDP in the second quarter was 2.2 percent higher than a year earlier, the strongest annual growth in a year.
Industrial output, services and construction strengthened in April, slowing in May and June.
ONS Chief Economist Joe Grice pointed out that growth was particularly strong in retailing, which makes the latest weak numbers important.
Commenting on today’s Q2 GDP figures, ONS Chief Economist Joe Grice said: pic.twitter.com/74zR4EtvPR— ONS (@ONS) July 27, 2016
Economists expect GDP to shrink in the back half of the year due to Brexit uncertainty with the UK at high risk of recession.
The retail sales figures raise doubts about the ability of consumers to stave off a Brexit recession.
The Confederation of British Industry said sales fell sharply between June 28 and July 14 and retailers cut orders with suppliers by the most since the 2008-09 financial crisis.
Worst CBI retail sales survey result since 2012 post-Brexit: pic.twitter.com/k8elmY8p4r— Ben Chu (@BenChu_) July 27, 2016
The CBI, which lobbies on behalf of industry in the UK, did warn against drawing too strong conclusions from the numbers.
“While conditions in the retail sector have weakened, we should be careful about reading too much too soon, as consumers were likely to err on the side of caution in the immediate period following a vote to leave the EU,” CBI chief economist Rain Newton-Smith said.
Retail conditions have weakened but inflation remains low and job nrs high overall https://t.co/lLNa0r6PQX— The CBI (@CBItweets) July 27, 2016
Low inflation and high employment levels might help sales bounce back in the short run, but in the medium term the big fall in sterling would push up prices, the CBI said.
“What businesses and consumers need now is calm and decisive leadership, a clear timetable and a plan for negotiating the UK’s future outside the EU,” Newton-Smith added.
Responding to the GDP data, British finance minister Philip Hammond said again that the government had the tools to support the economy as it entered a “period of adjustment” while preparing to leave the EU.
“Along with the Bank of England, this government will take whatever action is necessary,” he said.
ONS</a> stats show a 0.6% rise in GDP in the second quarter of 2016. Read the Chancellor's response <a href="https://twitter.com/hashtag/GDP?src=hash">#GDP</a> <a href="https://t.co/Jce4BlQeJL">pic.twitter.com/Jce4BlQeJL</a></p>— HM Treasury (hmtreasury) July 27, 2016
The Bank of England looks likely to cut interest rates for the first time since 2009 next week and may boost its quantitative easing stimulus programme.