Weekly Economic Insights - 20 May 2019

Macro Highlights - 5/22/2019

Highlights of the week

Economist insights: Trick or treat improvement in UK activity in the first quarter

United Kingdom

  • UK GDP grew 0.5% in the first quarter after 0.2% growth in Q4, resulting in an acceleration in the y-o-y figure from 1.4% to 1.8%
  • This stronger GDP growth was due, however, to massive stockpiling by companies and households ahead of the initial Brexit deadline, which was 29 March 2019
  • While this stockpiling trend led to a sharp increase in imports, it also contributed to the rise in production and household consumption
  • Accordingly, the improvement in economic activity observed in Q1 may only be temporary

Focus United Kingdom: The persisting uncertainty should exacerbate the slowdown in GDP growth in 2019 and 2020

  • While the Brexit deadline has been pushed back to 31 October, the uncertainty should continue to weigh on the pace of economic growth in the UK. Ruling out the assumption of a no-deal Brexit…
  • … and despite the carry-over effect on GDP growth in Q1 2019, we expect a slowdown in GDP growth from 1.4% in 2018 to 1.2% in 2019 and 1.0% in 2020…
  • … which could lead the BoE to maintain its key rate at 0.75% in 2019 and 2020
  • Pending  more visibility,  the pound  sterling,  which  remains 16% below  its  level before the announcement of the referendum, could stabilise

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