Consensus forecasts predict the UK will deliver GDP growth of 0.3 per cent on Wednesday in an ONS first estimate that will be “politically charged”.
The UK delivered GDP growth of 0.2 per cent in Q1 and was the worst performing economy in the EU for the quarter.
Hargreaves Lansdown senior investment analyst Laith Khalaf says a figure in line with consensus could be described as “muddling through”.
“The GDP growth number is very politically charged at the moment, because it acts as a scoreboard for Brexit. Expectations are for growth of just 0.3 per cent, which if met would suggest a disappointing showing in the first quarter was not just a one-off blip.”
However, Khalaf says it’s important not to read too much into one quarter.
EY Item Club is also predicting growth of 0.3 per cent on the back of the services sector.
“Industrial production and, especially, construction output both fell month-on-month in April and May, and were clearly on course for contraction over Q2,” says chief economic adviser Howard Archer.
EY Item Club recently downgraded its forecast for 2017 GDP growth from 1.8 per cent to 1.5 per cent.
“On the positive side, net trade should contribute significantly to growth as exports benefit from healthy global growth, including improved Eurozone activity, and a very competitive pound,” Archer says.
The first estimate is based on just under 50 per cent of the economic data that informs the final estimate. In Q1 the initial reading of 0.3 per cent was downgraded to 0.2 per cent.
This week’s GDP estimate follows an announcement that the IMF was downgrading its growth forecasts for the UK and the US for 2017.
It has revised its UK forecast to 1.7 per cent from 2 per cent, while it has downgraded its US forecast to 2.1 per cent from 2.3 per cent based.
Premier head of UK equities Chris White says a lack of consensus and clarity around Brexit is likely to hinder economic growth.
“It’s difficult to foresee substantial domestic or foreign investment in the UK given the uncertainty and existing overseas investors may reconsider their positions,” says White.
“The economy will get little help from consumers, unless consumer debt rises further, and the government is cautious about increasing expenditure despite the electorate’s concerns about austerity.”