Image © IRStone, Adobe Stock
UK economic growth is likely to drop in Q2 2019 and remain highly volatile throughout the rest of the year, according to new analysis by PwC economists.
According to the advisory firm's nowcasting model - which uses Bayesian machine learning techniques to produce more timely GDP estimates - the UK will see a sharp slowdown in GDP growth from 0.5% in the first quarter of 2019 to around zero in Q2 2019.
The nowcasting data comes after the latest set of official monthly GDP data from the ONS read at -0.4% for April, suggesting expectations for a slowdown in the economy in the second quarter are already well priced by market participants.
“The weaker performance in Q2 is driven by slower services growth and a substantial contraction in the production sector of the economy in April, as firms reversed the stockpiling of goods that they had done ahead of the original 29 March Brexit date," says John Hawksworth, chief economist at PwC.
Looking through the short-term noise in the GDP data, the underlying trend is for continued modest growth in the UK economy.
"Consumer spending is holding up relatively well on the back of a strong labour market, but businesses remain cautious about investing in the face of uncertainty about both Brexit and wider global trade tensions,” says Hawksworth.
PwC’s nowcasting model has proven relatively accurate in predicting UK GDP growth over the past two years and is frequently updated with new developments in Bayesian machine learning to maximise predictive accuracy.
"This allows PwC to estimate how fast the economy is growing almost two months ahead of official GDP figures being published by the ONS. The latest model estimates suggest zero growth in Q2 2019 relative to the previous quarter," says Hawksworth.