- UK Q2 final GDP +0.5% vs +0.4% q/q prelim
- Prior (Q1) +0.6%
- UK Q2 final GDP +1.4% vs +1.2% y/y prelim
- Prior (Q1) +0.9%
The breakdownIt is a mild revision higher to the initial estimate, reaffirming a more resilient UK economic picture in the second quarter. The services sector in particular held up relatively well, with output increasing by 0.6% during the quarter and estimated to be 1.7% higher compared with the same quarter a year ago.
As this is the final estimate though, it doesn't add much to the present outlook for BOE expectations. As things stand, inflation data will matter much more in terms of the impact toward market expectations and pricing.
What does the data measure?GDP measures the inflation-adjusted value of goods and services produced across the UK. This is the final Q2 estimate, incorporating more complete information than the preliminary release.
Why does it matter to markets?GDP gives traders a broad read on how well the UK economy is coping with restrictive interest rates and the energy-price shock. A sizeable revision could shift expectations around how much room the BOE has to tighten policy further.
How does this fit the broader economic picture?The preliminary estimate showed the economy growing 0.4% in Q2 after 0.6% in Q1, led by a 0.5% rise in services, while construction grew 0.3% and production was flat. Household consumption rose 0.3% and business investment increased 1.7%.
What is the potential market impact?An upward revision would generally be GBP-positive and gilt-negative, as stronger activity would give the BOE more scope to focus on inflation. A meaningful downgrade would work in the opposite direction by highlighting a weaker growth backdrop.
Current relevance to markets?Low. Today's GDP figures matter mainly as they relate to the growth side of the BOE's inflation-versus-activity trade-off. With this being a final estimate, revisions rather than the headline itself are likely to determine the market reaction. And typically, the impact is minimal given that the revisions aren't likely to be sizable.
This article was written by Justin Low at investinglive.com.