27 Jan 2015
UK GDP disappoints, raises concerns on the rebalancing story – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, comments that the below expectations UK GDP print at 0.5%qoq signals that the economy lost momentum in the second half of 2014, and further quotes, “the long heralded rebalancing story in the UK has completely stalled”.
Key Quotes
“UK 4Q14 GDP growth has come in at 0.5%QoQ/2.7%YoY versus the 0.6%QoQ/2.8%YoY consensus forecast. This is the eight consecutive quarterly expansion, but is disappointing, hinting at a loss of momentum in 2H14.”
“At this stage we only get the industry breakdown with the service sector expanding 0.8%/3.3%YoY while construction fell 1.8%QoQ and production industries saw output drop 0.1%QoQ. The latter was dragged down by weak utilities and mining output.”
“Consequently, the details show that the long heralded rebalancing story in the UK has completely stalled. This will be confirmed in a month’s time when we get the expenditure break-down that will show consumer spending being the key growth driver.”
“With inflation set to drop marginally below 0%YoY in the next couple of months it is little surprise to see that the market has priced out Bank of England policy tightening for this year. However, the comments from the BoE’s Mark Carney and Kristin Forbes over the weekend suggest that the upcoming Inflation Report may be less dovish than many market participants are anticipating. Consequently, we would be cautious about chasing sterling weaker.”
Key Quotes
“UK 4Q14 GDP growth has come in at 0.5%QoQ/2.7%YoY versus the 0.6%QoQ/2.8%YoY consensus forecast. This is the eight consecutive quarterly expansion, but is disappointing, hinting at a loss of momentum in 2H14.”
“At this stage we only get the industry breakdown with the service sector expanding 0.8%/3.3%YoY while construction fell 1.8%QoQ and production industries saw output drop 0.1%QoQ. The latter was dragged down by weak utilities and mining output.”
“Consequently, the details show that the long heralded rebalancing story in the UK has completely stalled. This will be confirmed in a month’s time when we get the expenditure break-down that will show consumer spending being the key growth driver.”
“With inflation set to drop marginally below 0%YoY in the next couple of months it is little surprise to see that the market has priced out Bank of England policy tightening for this year. However, the comments from the BoE’s Mark Carney and Kristin Forbes over the weekend suggest that the upcoming Inflation Report may be less dovish than many market participants are anticipating. Consequently, we would be cautious about chasing sterling weaker.”