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  • BBC News

UK economy shrinks for the first time since 2012


The chancellor has told the BBC that he does not expect the UK to slide into recession after data showed the economy shrank by 0.2% between April and June.

Sajid Javid was speaking after the Office for National Statistics said the economy had contracted for the first time since 2012.

The surprise decline came after Brexit stockpiles were unwound and the car industry implemented shutdowns.

The pound slid after the data was released, raising fears of a recession.

It hit a 31-month low against the dollar at $1.2056. Against the euro, it fell to a new two-year low of €1.0768.

Rob Kent-Smith, head of GDP at the ONS, said manufacturing output fell and the construction sector weakened.

A recession occurs when the economy contracts in two consecutive quarters. This is the first contraction since the fourth quarter of 2012.

Economists had not been forecasting a contraction in the economy in the second quarter, but had expected it to stagnate, with the consensus forecast for 0% growth.

Why is the economy shrinking?

The economy had shown 0.5% growth in the first quarter after manufacturers' stockpiling ahead of Brexit helped to boost output, when the manufacturing sector recorded its biggest quarter rise since the 1980s.

The ONS said GDP had been "particularly volatile" so far this year because of the changes to activity sparked by the original Brexit date of 29 March.

The statistics body said its latest figures showed that those increased stockpiles had been partly run down in the second quarter and that a number of car manufacturers had brought forward their annual shutdowns to April as part of contingency planning, which also hit growth.

Mr Kent-Smith said: "Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK's original departure date from the EU."

He added that "the often-dominant service sector delivered virtually no growth at all".


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