UK data remains soft but recession highly unlikely
|The most recent GDP readings from the UK have shown a contraction in month on month terms but taking a step back and looking at the bigger picture it doesn’t appear quite so bad. The August decline in m/m terms can be explained away by an upwards revision to an already strong July reading and a rolling 3-month average showed an increase of 0.3%. Following the contraction seen in the second quarter this means that another negative reading for Q3 is not at all likely, although growth remains tepid at best. The ONS also stated that they have received no anecdotal reports of Brexit preparations affecting the August metric.
While it may not make the same headlines as the GDP read, the latest manufacturing and industrial production reads perhaps offer greater insight into the health of the UK economy here, with sharp contractions seen in each coming as another warning sign.
While economic data shouldn’t be dismissed entirely it is very much of secondary importance to the markets at present with Brexit uncertainty continuing to loom large overhead. A lunch between UK PM Boris Johnson and Irish Taoiseach Leo Varadkar is a welcome development for those hoping for some progress but given the recent rhetoric the chances of any real progress seem to be slim to none.
There’s been minimal market reaction to this batch of data with the pond still treading water around the $1.22 mark and trading not far from its lowest level in 5 weeks.
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