Javid not expecting recession 'at all' after GDP drops

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In the most startling economic warning sign since the 2016 Brexit referendum, GDP fell at a quarterly rate of 0.2 percent in the three months to June, below all forecasts in a Reuters poll that pointed to a flat reading. Against the euro, the pound sank to a new two-year low of 90.70 pence, trading last 0.6% weaker at 92.66 pence.

Mr Javid's comments come after Sterling hit 1.2074 dollars, passing the 31-month low it reached on August 1 and down from 1.2138 dollars last night, before recovering slightly.

"GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter", said Rob Kent Smith, ONS head of GDP.

He also revealed that the service sector, usually a strong performer, "delivered virtually no growth at all".

The contraction compares to 0.5 per cent growth in the previous quarter, when the highest quarterly pickup in manufacturing since the 1980s was recorded.

Meanwhile, Javid added: "We saw some significant stockpiling by British businesses in anticipation of the Brexit that never was [on March 29], and now they're using those stockpiles, that is coming down". The biggest drag was a drop in manufacturing output, which caused the production sector to shrink by 1.4%.

The sector was also weighed down by a drop in transport equipment, which was 5.2 per cent lower due to annual auto factory closures being brought forward from summer to April, as companies planned for possible Brexit disruption.

Construction output was also weaker, falling by 1.3 per cent.

This compared with a 1.4% increase in the first quarter, with the quarterly decline largely reflecting a 6% drop in fix and maintenance work. But the bad news was widespread: Only the services sector returned a positive result, at 0.1% growth.

In a series of television interviews after the release, new Chancellor of the Exchequer Sajid Javid sought to play down the numbers, saying they "were not a surprise in any way", and that he doesn't expect a recession "at all".

John McDonnell, the shadow chancellor, said the "dismal economic figures are a direct result of Tory incompetence".

'Our economy since 2010 because of the hard work of the British people has grown by 19% and we have more people employed than ever before'.

Chris Williamson, chief business economist at IHS Markit, said the data showed "an economy in decline and skirting with recession as headwinds from slower global growth are exacerbated by a Brexit-related paralysis".

While most economists expect a rebound in the third quarter of the year as vehicle factories return to work and a combination of low unemployment and rising wages keeps consumer spending bubbling up, the countdown to Brexit and a possible "no-deal" on October 31 means that the outlook both for the United Kingdom and Ireland still hangs in the balance.

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