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James Smith, developed markets economist at ING, points out that the UK economy rebounded by 0.3% during May, albeit this was predominantly driven by production.

Key Quotes

“Manufacturing output had plummeted back in April, for two main reasons. Firstly, various car producers brought forward their usual summer factory shutdowns to the start of April. Now that these are over, car production returned to more normal levels during May. Secondly – and more importantly – new orders have slumped as firms grapple with what to do with the stockpiles they built up during the first quarter, in anticipation of a possible ‘no deal’ Brexit.”

“We expect this latter trend to continue into the summer months, which partly explains why manufacturing production failed to fully recover its April losses (-4.2%) during May (+1.4%).”

“All of this suggests that overall second quarter growth will come in flat, or possibly slightly negative. With the growth story unlikely to improve dramatically in the third quarter, we think the Bank of England is likely to keep policy on hold this year.”