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Goldman Sachs and J.P.Morgan lowered their full-year UK GDP growth prediction on Wednesday, citing an unexpectedly severe July decline. Each firm trimmed its projection by 20 basis points, with JPM predicting 0.4% growth and Goldman Sachs 0.3%.
GDP dropped 0.5% in July from June, worse than all estimates in a Reuters survey of experts who projected a 0.2% loss.
While J.P. Morgan and Morgan Stanley economists predict the UK economy to remain flat this year, a deluge of dismal economic data might imply a major recession danger.
The ONS cited severe weather and unexpected industrial action for the GDP drop, while global banks blamed a strong private sector slowdown and decreasing pace.
“August PMIs were worse than we anticipated, and we are growing little worried about the rate of employment indicator deterioration too,” Morgan Stanley economist Bruna Skarica said.
GDP figures showed Britain’s economy is deteriorating, maybe more than the Bank of England expected before its September policy meeting.
Instead of a 0.1% increase, Skarica now expects third-quarter GDP to stay unchanged.
“We disagree that the UK is facing a recession… That remains true, but near-term growth seems worse “Allan Monks, JPM economist.
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