U.K. economy boosts as car production gains


The U.K. economy rebounded in May as car factories resumed work following Brexit-related shutdowns.

GDP rose 0.3% after a decline in the previous month, the Office for National Statistics said Wednesday.

The increase was in line with the forecast in a Bloomberg survey. In the three months through May, GDP rose 0.3%, more than expected, after past figures were revised up.

Powering the recovery was the manufacturing sector, as vehicle output returned to normal.

Production collapsed the previous month after auto makers including BMW and Peugeot went ahead with shutdowns planned when Britain was set for a potentially chaotic departure from the European Union at the end of March.

Vehicle production surged 24% on the month, following a drop of the same magnitude in April. Both moves were the biggest since at least 1995.

Manufacturing as a whole increased 1.4% and provided the biggest contribution to the overall expansion.

But the bounce back may not be enough to prevent the economy from shrinking in the second quarter. GDP will fall unless June output manages another small gain, the statistics office said.

But purchasing-manager surveys last week painted a dismal picture for June, with firms feeling the pressure from political uncertainty as the new Brexit deadline of Oct. 31 approaches.

While the economy is expected to return to growth in the third quarter, Bank of England Governor Mark Carney has recently taken note of the increased downside risks to the outlook amid global trade tensions and rising chances of a no-deal Brexit. The next policy decision is on Aug. 1.

Economic forecasts published by the European Commission Wednesday also highlighted the subdued second quarter.

The EU’s executive arm predicts growth of 1.3% this year and next, although those projections are based on a technical assumption of no change to trading patterns with the bloc and thus do not take into account any disruption caused by Brexit.

Suzan O