The latest data suggests that the economy dealt well with the pre-referendum uncertainty, with GDP growth picking up from 0.4% in Q1 to 0.6% in Q2. But the quarterly expansion was entirely driven by activity in April, perhaps setting a poor base for growth in Q3, which will be compounded by the uncertainty created by the vote to leave the EU. Indeed, July’s Markit/CIPS composite PMI is at a level consistent with quarterly contractions in GDP of around 0.5%. (See Chart.) That said, we continue to expect a positive response from policymakers – starting with a stimulus package from the MPC tomorrow – to mean that the ultimate economic damage is rather smaller than some of the more pessimistic pre-referendum projections suggested. For now, we think that the economy will broadly stagnate over the next few quarters, but the outlook remains highly uncertain.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services