Official figures reveal a 0.5% advance in UK GDP in the first quarter to 31 March. But experts warn that the pace of UK economic growth may tail off through the rest of 2019.

A 0.5% expansion was about in line with forecasts but the likelihood of a slowdown was reflected in a relatively modest response from sterling against other major currencies.

Somewhat counter-intuitively, growth has been boosted by Brexit with stockpiling ahead of a potential no deal exit on 29 March supporting the manufacturing sector.

Less positively monthly GDP figures for March came in at -0.1% against the flat month-on-month performance which had been forecast and the delay to Brexit means uncertainty is being prolonged for business.

WHAT THE EXPERTS ARE SAYING

Phil Smeaton, chief investment officer at Sanlam UK says: ‘Political uncertainty still looms over the UK economy, with the chances of a cross-party Brexit deal appearing less likely by the day. For the time being at least, growth is holding up.’

‘Jobs are still being created and wage growth remains strong. But there are concerns that this positivity is being driven by a continuing inventory build-up, and this is expected to unwind as we head toward H2.’

Director at risk advisory firm JCRA Chris Towner notes one bright spot as he says: ‘Interesting to see a strong contribution to the overall GDP number came from business investment in the UK, which also grew by 0.5% in the first quarter of 2019.’

PwC senior economist Mike Jakeman adds: ‘It is fair to say that the economy has performed well in the face of acute political uncertainty, buoyed by households continued determination to spend.’

‘However, we note that some of the factors that have contributed to a strong GDP print in the first quarter are likely to detract from growth in the coming months.’

‘It is also important to recognise that with the outcome of Brexit still unresolved, there is a strong possibility that further bouts of political tension could exert downward pressure on the economy later this year. We continue to project growth of around 1.2% this year.’

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Issue Date: 10 May 2019