United Kingdom: Upside GDP surprise, limited BoE impact – TD Securities

TD Securities reports that United Kingdom (UK) Gross Domestic Product (GDP) for June surprised to the upside at 0.3% m/m, driven by a strong services sector expanding 0.4% m/m. May was revised to flat, leaving June as the only positive month in Q2. Quarterly growth reached 0.4% q/q, slightly above Bank of England (BoE) projections, but TD argues this does not signal a fundamental growth story or a clear case for rate hikes.

Stronger data yet cautious policy view

"UK GDP surprised to the upside in June, coming in at 0.3% m/m (TDS: 0.0%; mkt: -0.1%; prior: 0.0%), and driven by strength in the services sector of 0.4% m/m (TDS/mkt: 0.0%; prior: 0.1%). The latter saw broad based growth, with only wholesale trade showing any real contraction."

"Simultaneously, May was revised to flat, making June the only positive growth month in Q2."

"Ultimately though, on a quarterly basis, UK economy grew in line with market expectations of 0.4% q/q, which is just above the BoE projections of 0.3% q/q."

"Given that this is at least partially driven by the strength in Q1, it should not be taken as a fundamental growth story and is unlikely to stir those MPC members that currently voting for a hold into choosing to hike at their next meeting."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)