Goldman, J.P.Morgan cut UK's 2023 growth forecast

Goldman Sachs and J.P.Morgan on Wednesday cut their full-year growth forecast for the UK's gross domestic product (GDP), citing an unexpectedly sharp contraction in the economy in July.

The brokerages cut their forecast by 20 basis points each with JPM now expecting 0.4% expansion and Goldman Sachs pencilling 0.3% growth.

The Office for National Statistics (ONS) said GDP shrank 0.5% in July from June, worse than all forecasts in a Reuters poll of economists that had predicted a contraction of 0.2%.

Economists at J.P.Morgan and Morgan Stanley warned that while they expect the UK economy to be flat this year a barrage of poor economic data might indicate a serious risk of recession.

While the ONS blamed bad weather and industrial action by doctors for the economic contraction, the global banks said that a sharp downturn in the private sector led to the weakness and suggested slowing momentum.

"August PMIs were worse than we had expected, and we are getting slightly concerned about the pace of deterioration in employment indicators too," Bruna Skarica, economist at Morgan Stanley said.

GDP data underlined signs that Britain's economy is weakening, perhaps by more than the Bank of England's expectation ahead of its September policy meeting.

Skarica now expects third quarter GDP to remain flat against an earlier projection of 0.1% growth.

"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," JPM economist Allan Monks said.