28 Apr 2015
UK Q1 GDP disappoints, might rebound in Q2 – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, reviews the UK Q1 GDP results and further adds that the upbeat business surveys , employment growth and consumer confidence suggests the outlook for UK growth still looks good.
Key Quotes
“UK 1Q GDP came in at a very disappointing 0.3%QoQ. The consensus was for 0.5% growth with a range of predictions from 0.3 to 0.8%. At this stage we only get the industry breakdown, which shows industrial production output fell 0.1%QoQ, Construction fell 1.6%QoQ while service output rose 0.5%.”
“It is clear from monthly data that January was a very weak month with all three major industry blocks contracting. However business surveys rebounded later in the quarter, particularly in March, which should set up 2Q15 for a big improvement on 1Q growth.”
“In any case, employment growth and consumer confidence remain very firm so the underlying story on UK growth remains good.”
“Nonetheless, politics could be an issue in coming quarters. The May 7 election looks set to be incredibly close, which will require parties to work together for a government to be formed. Any government majority is likely to be tiny raising issues over the strength and durability of any government.”
“Then there is the uncertainty over whether there will be an EU referendum or another Scottish independence referendum in the not too distant future. This has the potential for unsettling foreign investors.”
“Moreover, there is the concern that a government may not be formed at all, requiring another election in coming months. As such market volatility is likely to remain high with sterling set to remain under pressure.”
Key Quotes
“UK 1Q GDP came in at a very disappointing 0.3%QoQ. The consensus was for 0.5% growth with a range of predictions from 0.3 to 0.8%. At this stage we only get the industry breakdown, which shows industrial production output fell 0.1%QoQ, Construction fell 1.6%QoQ while service output rose 0.5%.”
“It is clear from monthly data that January was a very weak month with all three major industry blocks contracting. However business surveys rebounded later in the quarter, particularly in March, which should set up 2Q15 for a big improvement on 1Q growth.”
“In any case, employment growth and consumer confidence remain very firm so the underlying story on UK growth remains good.”
“Nonetheless, politics could be an issue in coming quarters. The May 7 election looks set to be incredibly close, which will require parties to work together for a government to be formed. Any government majority is likely to be tiny raising issues over the strength and durability of any government.”
“Then there is the uncertainty over whether there will be an EU referendum or another Scottish independence referendum in the not too distant future. This has the potential for unsettling foreign investors.”
“Moreover, there is the concern that a government may not be formed at all, requiring another election in coming months. As such market volatility is likely to remain high with sterling set to remain under pressure.”