Preliminary estimates of Q2 GDP growth in the UK came out to be -0.7% according to the Office of National Statistics. This is a sharper contraction than forecast of -0.2% as well as Q1 reading of -0.3%, which was revised lower from -0.2%. This is the 3rd Quarter of negative growth and according to a bloomberg article is the worst quarterly reading in 3 years.
Bad weather, and the Jubilee where businesses closed for celebration of queen are some of the factors for the poor data during Q2.
The chart above shows quarterly readings going back to the beginning of 2007. This reflects the “double” dip scenario, although the UK is not where it was at the end of 2008 and beginning of 2009.
The markets actually rallied after this poor release as it has already be trading in the risk-off mode since last week. European stocks rallied, and the FTSE 100 was slightly higher.
The GBP/USD pulled back immediately after the initial reaction to the release which made new lows. The euro did gain sharply against the sterling after the release, but has yet to prove that this is not just noise within a down trend going back to July 2011.