uk gdp jul 2018 - reaction
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UK GDP (Jul 2018): Growth stronger than expected as hot summer helped service sector growth & construction, production weighed by slow energy demand; total trade deficit narrows 1.4B 3M-to-July



0.6% - GDP (3M/3M) Jul: (est. 0.5%, prior 0.4%)

0.3% - GDP (MoM) Jul: (est. 0.1%, prior 0.1%)

1.6% - GDP (YoY) Jul: (est. %, prior 1.3%)


0.1% - Industrial Production (M/M) Jul: (est 0.2%; prev 0.4%)

0.9% - Industrial Production (Y/Y) Jul: (est 1.1%; prev 1.1%)

-0.2% - Manufacturing Production (M/M) Jul: (est 0.0%; prev 0.4%)

1.1% - Manufacturing Production (Y/Y) Jul: (est 1.3%; prev 1.5%)

0.5% - Construction Output SA (M/M) Jul: (est 0.4%; prev 1.4%)

3.5% - Construction Output SA (Y/Y) Jul: (est 3.5%; prev 2.2%)


-0.11B - Total Trade Balance (GBP) Jul: (est ; prev -0.94B)

-2.80B - Trade Balance Non-EU (GBP) Jul: (est ; prev R -2.86B)

-9.97B - Visible Trade Balance (GBP) Jul: (est ; prev R -10.68B)


0.3% - Index of Services (M/M) Jul: (est 0.2%; prev 0.0%)

0.6% - Index of Services (3M/3M) Jul: (est 0.6%; prev 0.5%)



- Warm weather & the World Cup helped services; especially retail sales

- Construction also seeing a rebound from slow start of year

- Industrial production weighed down by manufacturing dip; low energy demand

- No evidence of stockpiling seen in the numbers

- Goods exports/imports up by more with the EU vs non-EU 12-mths to Jul 2018

- Total trade deficit narrowed 13.8B to 17B 12-mths, with trade in services widening

- On a CVM basis, the trade balance narrowed 3-mths-to-Jul

- GDP contributions (Jul): Serv=0.21%, Prod=0.01%, Cons=0.03%, Agri=0.00%




UK expands at a healthier pace as high street plays its part


There was good news for the UK economy today as UK activity accelerated at the start of Q3, following a sluggish start of summer. Construction and trade data added some cheer whilst production was hit by low energy demand.


UK gross domestic product (GDP) grew by 0.6pct (vs 0.4pct in June) in the three months to July, as the rolling 3-month figure beat expectations. On the month, GDP rose 0.3pct, also above forecast and previous (0.1pct). 


“Growth in the economy picked up in the three months to July. Services grew particularly strongly, with retail sales performing well, boosted by warm weather and the World Cup. The construction sector also bounced back after a weak start to the year," commented Head of GDP Rob Kent-Smith. 


Services was very much in the driving seat, the 3-months to July saw output increase by 0.6pct 3-months ending April 2018; the largest growth since January 2017. Wholesale, retail and the motor trade sector made the largest contribution to 3-month on 3-month growth for the third consecutive month, contributing 0.23 percentage points.


Industrial production output for July rose a disappointing 0.1pct, missing the 0.2pct median and down from June's 0.4pct. Gains were seen in mining and quarrying (3.3pct); within oil and gas extraction, where there was a return to production following planned maintenance during June. However, industrial action by some North Sea oil workers and the hot summer likely held back the rebound.


In fact, underlying activity for production has been underwhelming. Industrial production 3-months to July fell by 0.5pct 2018 when compared with the 3-months to April. Falling energy demand, lower oil and gas extraction due to maintenance and a continuation of recent longer-term weakness within basic metals and metal products were also factors.

Turning to trade and the UK’s total deficit (goods and services) narrowed GBP1.4B to GBP3.4B in the 3-months to July 2018. On the month, the trade data deficit narrowed to just GBP111M, its lowest since 3-months to February. Excluding erratics, the trade deficit narrowed GBP200M to GBP5.2B 3-months to July. Exports and imports of goods to and from EU countries were up by more than those to and from non-EU countries over the 12 months to July 2018.


“Today’s headline GDP growth rate is flattered by a comparison to the start of the year which was heavily affected by the poor weather. The current strength of the retail sector in particular looks vulnerable in the face of persistently weak wage growth,” said Alastair Neame, Senior Economist at the Centre for Economics and Business Research (Cebr).


Market reaction to the data dump this morning was very muted. Cable (GBP/USD) held steady around the 1.2935 area immediately after the release. UK Gilt futures were also quiet post data, around 122.10.


Ahead of Thursday’s Bank of England rate decision, markets have next to no expectation of a further rate hike this year.


Samuel Tombs, Chief U.K. Economist at Pantheon Macroeconomics, “Overall, July’s data suggest that the risks to the MPC’s forecast for another 0.4% quarter-on-quarter rise in GDP growth in Q3 lie to the upside. But the fall in the confidence components of the Markit/CIPS and Lloyds surveys, the slowdown in global manufacturing, and the prospect of a further escalation of political tensions in the U.K. suggest that the economy is heading for a weak end to 2018.”


Harry Daniels - LiveSquawk news

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