That aside, it’s worth remembering that the UK’s GDP figures have a well-worn trend of performing better in the first half of the year than the second. That’s been the case ever since 2022, and we think that’s down to challenges with seasonally adjusting the data in a high inflation period. The performance of the three-month change in monthly GDP since the start of the year has been broadly consistent with this trend, though generally a bit stronger.
Still, it is undeniable that the UK economy has performed better than widely expected amid the fallout of the Iran war. We think that can be partly explained by the simple fact that inflation hasn’t risen as much as it could have done. Food inflation in particular has been surprisingly benign. And that has helped ease the initial squeeze on households. How much longer that can continue, in an environment of rising energy prices and a fragile jobs market, is debatable.