TD Securities reports that United Kingdom (UK) Gross Domestic Product (GDP) for June surprised to the upside at 0.3% m\/m, driven by a strong services sector expanding 0.4% m\/m. May was revised to flat, leaving June as the only positive month in Q2. Quarterly growth reached 0.4% q\/q, slightly above Bank of England (BoE) projections, but TD argues this does not signal a fundamental growth story or a clear case for rate hikes.<\/p>\n
Stronger data yet cautious policy view<\/p>\n
“UK GDP<\/a> surprised to the upside in June, coming in at 0.3% m\/m (TDS: 0.0%; mkt: -0.1%; prior: 0.0%), and driven by strength in the services sector of 0.4% m\/m (TDS\/mkt: 0.0%; prior: 0.1%). The latter saw broad based growth, with only wholesale trade showing any real contraction.”<\/p>\n “Simultaneously, May was revised to flat, making June the only positive growth month in Q2.”<\/p>\n “Ultimately though, on a quarterly basis, UK economy grew in line with market expectations of 0.4% q\/q, which is just above the BoE<\/a> projections of 0.3% q\/q.”<\/p>\n “Given that this is at least partially driven by the strength in Q1, it should not be taken as a fundamental growth story and is unlikely to stir those MPC members that currently voting for a hold into choosing to hike at their next meeting.”<\/p>\n