Goldman and JPMorgan lower UK’s growth forecast for 2023

Goldman Sachs and JPMorgan on Wednesdaylowered their estimates for the UK’s GDP growth for the entire year, citing an unexpectedly severe decline in the economy in July.

The brokerages each reduced their projection by 20 basis points, with JPMorgan now anticipating 0.4 per cent growth and Goldman Sachs pegging growth at 0.3 per cent.

In contrast to all predictions in a Reuters survey of experts, which had projected a drop of 0.2 per cent, the Office for National Statistics (ONS) said that GDP shrank by 0.5 per cent in July from June.

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While JPMorgan and Morgan Stanley economists anticipate a flat UK economy this year, a bombardment of dismal economic data might signal a significant risk of recession, they said.

The global banks claimed that a severe slump in the private sector was to blame for the weakness and projected diminishing momentum, in contrast to the ONS, which attributed the economic contraction to bad weather and doctor-led strikes.

“August PMIs were worse than we had expected, and we are getting slightly concerned about the pace of deterioration in employment indicators too,” Reuters quoted Bruna Skarica, an economist at Morgan Stanley, as saying.

The British economy may be deteriorating more than the Bank of England anticipated in advance of its September policy meeting, according to GDP figures.

In contrast to a prior prediction of 0.1 per cent growth, Skarica now anticipates that third quarter GDP will remain flat.

“We have been arguing against the idea that the UK is entering into a proper recession dynamic... That remains the case, but the near-term path for growth looks worse,” JPMorgan economist Allan Monks told Reuters.

(With inputs from Reuters)

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