Will growth rebound?

April’s business surveys provide hope that GDP growth will rebound in Q2 from the sharp slowdown in Q1 confirmed in this week’s official figures. Indeed, the Markit/CIPS PMI is now consistent with quarterly growth of 0.5% or so. But given that the surveys have been overly optimistic before, why should we believe them now? For a start, the official figures suggest that the economy accelerated throughout the first quarter and hence entered Q2 with a decent amount of momentum. What’s more, we already know that retail sales rebounded in April, setting consumer spending up for a stronger quarter. There were also some temporary factors – such as unusually-warm weather – that dragged on industrial production in Q1 and should be reversed. As a result, we think growth will re-accelerate in Q2 and beyond and are sticking to our forecast of 2% growth for this year a whole.