Growth slows but full-blown recession should be avoided

At first glance, the economy appears to have brushed off the EU referendum. The economy was performing well prior to the vote, with GDP and employment growth both accelerating in Q2. Meanwhile, households appear to be coping well after the referendum, with retail sales surging and claimant count unemployment falling in July. And, following initial post-referendum slumps, the all-sector Markit/CIPS PMI and CBI growth tracker both rebounded in August. However, employment intentions point to a slowdown in the labour market ahead. And an average of the July and August PMI is consistent with quarterly growth around zero. Accordingly, while we think a full blown recession will be avoided, GDP should broadly stagnate over the second half of 2016.