UK: Growth momentum driven by services sector – ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 2, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – James Smith, Economist at ING, notes that the first estimate of UK fourth quarter 2015 GDP came in at 0.5% QoQ, in line with the consensus forecast and is a touch above the final third quarter reading of 0.4%.

    Key Quotes

    “Although we will have to wait for the next release for a full component breakdown, the split by industry reveals that the services sector continues to do the heavy lifting. On a quarterly basis, the service sector grew 0.7%, whilst manufacturing remained flat (sterling strength and weak external demand likely to blame). This release completes the set for 2015, and shows that the economy grew at a respectable 2.2% last year, albeit below the 2.9% reading in 2014.

    Looking ahead, strong employment growth and resilient confidence indicators suggest that the UK economy has made an encouraging start to 2016. However, the referendum on the UK’s EU membership looks increasingly likely to occur this year (with a vote in late 2Q/early 3Q possible depending on the outcome of February’s European Council meeting). The uncertainty surrounding the vote may prompt a slowdown in the pace of hiring and investment, and as such we may see some weaker growth figures around the time of the referendum.

    With inflation pressures looking benign (given the recent plunge in oil prices and the fact that wage growth remains subdued), the Bank of England has greater scope to keep rates low for longer to wait for uncertainty surrounding Brexit to decline. With this in mind, we retain the view that Bank of England will not hike rates until November at the earliest.”
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