Britain's economy shrinks in April as car factories close, Brexit By Reuters expects

LONDON (Reuters) – Britain's economy sharply declined in April following the biggest decline in car production since the records began, as manufacturers failed to reverse closures scheduled for Britain's expected departure from the EU.

In early 201[ads1]9, many car manufacturers had announced temporary closure in the UK for April, assuming trade disruption around the time Britain was leaving the EU on March 29.

In that event, Prime Minister Theresa may delayed the departure by just days to go, and then set a new date October 31 – but it was too late for businesses to change their plans.

In April, Britain's economy totaled 0.4% in April after a fall of 0.1% in March, the National Statistics Office said on Monday, a larger decline than any economist had forecast in a Reuters survey in the previous week.

Growth in the three months to April slowe d to 0.3% from 0.5% in the first quarter of 2019, also had a sharper deceleration than most economists expected. Annual growth decreased to 1.3%.

But this masked a far greater impact on production, which decreased by 3.9% for the month of April, the largest fall since June 2002.

Car manufacturing in April fell 24% by month, the largest decline since the records began in 1995, and the broader category of "transport equipment" showed its biggest decline since 1974. "GDP growth showed some decline over the last three months, while the economy slowed down in April, mainly due to a dramatic fall in car production, with uncertainty ahead of the UK's original EU departure date leading to planned closures, said ONS statistician Rob Kent-Smith.

BMW closed its British Mini and Rolls-Royce (LON:) plants for the whole of April, Peugeot & # 39; s Vauxhall car factory and Jaguar Land Rover also drew up planned summer closures until April

Monday's data confirms that the economy is slowing down after receiving a larger than expected increase in the first three months months of 2019 from businesses who saved themselves before a Brexit that never came.

The Bank of England provided last month that GDP growth will drop to 0.2% over the three months to June from 0.5% in the first quarter, but Saturday chief economist Andy Haldane wrote that he still expected "solid" Growth of 1.5% for the whole of 2019.

Mays Purchasing Manager's Index Surveys pointed out that the economy is near stagnation, even though they were just as gloomy in the first quarter when official data proved strong, despite concerns about Brexit's business.

"April's dip in GDP and apparently continuous softness in May strengthens our belief that the economy is heading for a markedly weaker second-quarter performance," Howar d Archer, chief economist at consultants EY ITEM Club, said in a note.

"We had expected GDP growth to be no more than 0.2% quarter in quarter in the second quarter, but even this poor performance is now looking somewhat optimistic."

Britain's economy has lost momentum since 2016's Brexit referendum – before the growth will usually exceed 2% a year – but the labor market has strengthened, and Haldane said the time for another interest rate increase was approaching.

This attitude contrast with the outlook in markets, where concerns about the trade conflict between the United States and China have intensified, along with the risk of the UK still being able to face a disruptive departure from the EU on 31 October.

The impact of the twin worries about trade tensions and Brexit could also be seen in trading data, which was also released on Monday.

The UK saw its biggest monthly drop in commodity imports since the records began in 1998, down 14.4% in April. Exports also went out monthly, down 10.9% in April, the biggest fall since July 2006.

The trade deficit was reduced as the increased level of imports of companies to prepare Brexit before March 29 fell.

The trade balance for goods decreased to £ 12.1 billion ($ 15.3 billion) from £ 15.4 billion in March.