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UK Q2 economic contraction confirmed; Q1 growth revised higher

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UK Q2 economic contraction confirmed; Q1 growth revised higher

The U.K. economy contracted 0.2% on a quarterly basis in the second quarter following a revised 0.6% expansion in the first quarter, final data from the Office for National Statistics showed.

The contraction was the first since the end of 2012, amid volatility reflecting changes in the timing of activity related to the varying Brexit dates, the ONS said. The U.K. was initially due to exit the EU on March 29, but the departure has been postponed to Oct. 31.

Stockpiling helped boost GDP in the first quarter, while the momentum did not continue in the second quarter, according to the ONS.

The latest print is line with a preliminary estimate from the ONS and the Econoday consensus estimate, both projecting GDP to fall 0.2% in the second quarter.

Services, being the sole positive contributor to growth in the output approach to GDP, saw growth ease to 0.1% in the second quarter from the prior quarter's 1.1% expansion. Growth in the services sector marked the weakest quarterly rate in three years.

Production output declined by a downwardly revised 1.8%, marking the steepest fall since the fourth quarter of 2012. This was led by a revised 2.8% drop in manufacturing output, reflecting the impacts of bringing forward activity in the first quarter and a fall in car production as summer shutdowns for planned maintenance were brought forward to April, the ONS noted.

Private consumption, government expenditure and net trade contributed positively, while gross capital formation contributed negatively to GDP growth in the second quarter.

GDP grew 1.3% in the second quarter compared with the year-ago period, down from a year-over-year growth of 2.1% in the first quarter.

The British Chambers of Commerce and the Organisation for Economic Co-operation and Development recently trimmed U.K. growth forecasts for 2019 and 2020 amid Brexit uncertainty and a global economic slowdown.