UK: GDP growth headed north - Rabobank

UK GDP came in at 0.4% QoQ for this year’s third quarter, the fastest pace of growth of this year and 0.1%-point better than initially expected, points out the research team at Rabobank.

Key Quotes

“The year-on-year rate remained unchanged at 1.5% however. There is no breakdown in expenditures yet, but the preliminary findings of the ONS show that the services sector – which accounts for around 80% of UK GDP – grew 0.4% and industrial production was up 1% whereas construction shrank the most in five years.”

“Even at 0.4%, the growth pace is still below-trend and much weaker than in other developed economies. The better-than-expected release did however remove the last barrier for the Bank of England to pursue their planned but not uncontroversial rate hike. Speaking about seizing the moment… Sterling, currently trading at 0.89 versus the euro, regained the territory that was lost on Tuesday as money markets re-priced the odds of a November rate hike. A 91% chance of such a hike is currently priced-in, although the recent spate of economic data have dulled expectations regarding a follow-on move in 2018. The BoE may therefore breathe a sigh of relief, but that does not change the fact that it will most likely be a hike with some serious dovishness attached to it.”