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[MARKET ANALYSIS] UK GDP signals resilient Q2 growth; GBP unreactive

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[MARKET ANALYSIS] UK GDP signals resilient Q2 growth; GBP unreactive

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  • Not too much learnt from the latest UK growth data, as while GDP grew by 0.1% M/M in May, (inline/firmer than exp., depending on data vendor), revisions saw April’s data remaining in contractionary territory. Alongside the release, ONS noted the modest growth in May was driven by services alone, with production and construction both falling back. Within the internals, energy and construction dragged on the headline figure. For the BoE, the latest data does not give a bias towards more tightening than is currently priced, as while the data signals modest growth in line with expectations, policymakers will be attentive to the labour market and inflation metrics due next week, alongside the Fiscal implications of the incoming PM. GBP was unreactive to the data series as focus remains on UK politics, including several outlets reporting Mahmood is seen as the next Chancellor. 
  • ING has doubts over the data, as while the figure signals decent growth, it noted surveys and labour metrics remain weak. ING expects growth to slow to 0.1-0.2% in the third quarter, and says it's likely to be 0.4% in Q2.
  • Pantheon Macro raised its forecast for Q2 GDP from 0.2% to 0.3% following the data. Pantheon said its measure of underlying GDP, which strips out volatile sectors and some front-running of tariffs, tax changes and supply disruptions - rose by 0.3% month-to-month. For the BoE, it assumes a prolonged period of rates on hold, but solid growth is one reason that a hike is more likely than a cut.
  • Lloyds says it seems unlikely that any MPC votes will switch on the basis of this report, noting the print did not deviate from expectations and reinforces the view that UK economic activity continues to hold up better than expected.

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