Commenting on this morning’s UK GDP data, Melanie Baker, Senior Economist at Royal London Asset Management, said:
“Despite past ONS revisions improving the Covid-era backstory for GDP, since early 2022 it still looks like the UK economy has barely grown.
“The past three months have again been bumpy for UK GDP, and the economy looks on track for a fall in GDP in the third quarter. The extra bank holiday hit output in May, June bounced back stronger than expected, then July saw a bigger than expected fall. Taking all these months together, GDP hasn’t grown since April. If, say, the economy grew another 0.2% month-on-month in September, that would leave Q3 tracking a 0.1% quarter-on-quarter fall in GDP.
“For now, the picture of the economy coming from the data is lacklustre. Given how much monetary policy tightening we’ve had it is still somewhat surprising that the UK economy has managed to avoid recession so far. I am not convinced it will continue to do so. PMI business surveys are looking consistent with falls in private sector output and the labour market has been showing more signs of weakness.
“We’ve still got a few data points to go before the Bank of England’s next meeting on 2 November and the CPI release next week will probably be the most important of those. I expect headline and core inflation to move lower in coming months. Soft activity data and labour market data, however, would help give the Bank of England the confidence to view inflation as heading sustainably lower as we move through the next quarters.”
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The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.