While the downward revision to the ONS’ estimate of Q1 GDP growth from 0.3% to just 0.2% was a disappointment, the business surveys still suggest that a pick-up in growth in Q2 is on the cards. Admittedly, the Markit/CIPS all-sector PMI, which is a weighted average of the manufacturing, construction and services sector surveys, dipped a little in May. Nonetheless, it still points to quarterly GDP growth of about 0.5%. What’s more, the future activity index actually picked up, which, combined with other survey evidence such as the CBI’s monthly growth indicator, suggests that this momentum can be sustained in the near term. As a result, we still expect GDP growth of 2% this year. Of course, the General Election on 8th June could alter the outlook. After all, the two main parties have radically-different plans for fiscal policy. But the resilience of the economy to political uncertainty recently suggests that GDP growth would hold up regardless of the outcome.
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