27 Jan 2015
UK GDP might surprise to the upside – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, expects UK GDP release to come out above consensus expectations, predicting the number to stand at 0.8%qo1, aided by the strong performance of the service sector.
Key Quotes
“The relationship between business surveys and the official GDP growth rate has broken down over the last 18 months or so, with GDP growth having clearly disappointed. This is most evident with the purchasing managers’ indices, which had suggested GDP growth should have been a full half a percentage point faster than officially recorded.”
“The PMIs have slowed markedly recently, relative to other surveys, and are at levels suggesting the economy grew 0.6% QoQ in the final three months of 2014. Despite the apparent relationship breakdown, this is also what the consensus is predicting.”
“However, other data has been suggesting that the UK has maintained momentum. The service sector is performing very strongly domestically while the British Chambers of Commerce also reported a strong bounceback in both domestic and export manufacturing sales. Service sector exports merely tread water in 4Q14. Aggregating this points to a stronger GDP outcome.”
“Furthermore, last week’s retail sales numbers highlighted the strength in domestic demand.”
“Consequently, while we only get a partial GDP report today, we think that there is upside potential and predict 0.8% QoQ GDP growth.”
“With BoE Governor Mark Carney having talked up the potential for the UK over the weekend while emphasising that the BoE continues to “look through” temporary inflation weakness, suggests such an outcome would be a big positive for sterling.”
Key Quotes
“The relationship between business surveys and the official GDP growth rate has broken down over the last 18 months or so, with GDP growth having clearly disappointed. This is most evident with the purchasing managers’ indices, which had suggested GDP growth should have been a full half a percentage point faster than officially recorded.”
“The PMIs have slowed markedly recently, relative to other surveys, and are at levels suggesting the economy grew 0.6% QoQ in the final three months of 2014. Despite the apparent relationship breakdown, this is also what the consensus is predicting.”
“However, other data has been suggesting that the UK has maintained momentum. The service sector is performing very strongly domestically while the British Chambers of Commerce also reported a strong bounceback in both domestic and export manufacturing sales. Service sector exports merely tread water in 4Q14. Aggregating this points to a stronger GDP outcome.”
“Furthermore, last week’s retail sales numbers highlighted the strength in domestic demand.”
“Consequently, while we only get a partial GDP report today, we think that there is upside potential and predict 0.8% QoQ GDP growth.”
“With BoE Governor Mark Carney having talked up the potential for the UK over the weekend while emphasising that the BoE continues to “look through” temporary inflation weakness, suggests such an outcome would be a big positive for sterling.”