Recovery loses some momentum in Q2

The latest data survey data suggest that growth slowed further in the second quarter, ahead of the referendum. Indeed, the Markit/CIPS composite PMI ended June at a level consistent with no quarterly growth in GDP. That being said, the official data have been a bit more upbeat. For example, although industrial production fell in May, this followed a robust 2.1% rise in April. Accordingly, it is likely to post a solid gain in Q2 overall. Note too that services output rose by a solid 0.6% on the month in April. Admittedly, we think that the economy will stagnate over the next few quarters, following the vote to leave the EU, as uncertainty weighs on activity. But policymakers have scope to respond to any weakness in order to prevent a more severe downturn.