The UK monthly GDP: Economy set to perform well after BoE’s confidence
|- The UK first monthly GDP estimate for May is set to rise 0.3% m/m.
- The Bank of England Governor Mark Carney said last week the changes to the ONS publishing schedule will not affect the MPC in having all necessary information at the time of August Inflation Report.
- The recent rise and fall in GBP/USD reflect the early market estimate of Brexit optimism after the personnel changer at Brexit ministry.
The UK gross domestic product (GDP) is expected to rise 0.3% over the month in May, the first monthly GDP estimated from the Office for National Statistics (ONS) is set to announce on Tuesday, July 10.
Although it is hard to predict the first release of any kind of the economic indicator, a 0.3% increase over the month in May is a pretty much the consensus among analysts that saw the preliminary estimate for the first-quarter GDP of 0.1% Q/Q too weak. That is particularly the case in recent speeches from the Bank of England officials and the Bank of England official monetary policy statement in June that all pointed out to the first-quarter temporary weather-related blip in the UK growth.
With UK monthly GDP increasing 0.3% m/m in May, the growth rate will be more optimistic compared to revised 0.2% Q/Q final estimate for the first quarter and slightly less optimistic than 0.4% in the previous quarters.
This also bodes well with the Bank of England growth outlook expressed in both June Monetary Policy Committee (MPC) policy statement and the Bank of England Governor Mark Carney’s optimistic view expressed last week that has increased the chances of the Bank of England moving forward with the rate hike in August.
While speaking at the Northern Powerhouse Business Summit in Newcastle on Thursday last week, Carney confirmed the message from the June meeting of the Monetary Policy Committee (MPC) saying “the incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate.”
Carney also said the MPC is ready to act on rates as soon as this August saying the policymakers will have enough information about the evolution of the UK economy even after the Office for National Statistics (ONS) rescheduled its macro data release calendar.
Although Carney made no direct policy changes hints in his speech, the market reaction was Sterling positive as the affirmative tone of Carney’s speech aligns with the Bank of England’s hawkish twist in June, when the number of voters favoring the rate hike increased to three policymakers with Bank of England chief economist Andy Haldane joining in the camp of external hawks Ian McCafferty and Michael Sauders to form 6-3 voting pattern.
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