The UK’s Office for National Statistics released the second revised estimate for the UK’s GDP last week. According to the official data, the economic activity in the UK rose 0.3% in the quarter ending June.
This was broadly in line with the median estimates which expected to see an unchanged print from the first estimates. On a year over year basis, the UK’s GDP was seen rising at an annual rate of 1.7% in the June quarter.
The ONS also said that the services sector managed to contribute to the GDP while the manufacturing and construction sectors posted a drag. Household spending was also seen weakening, rising just 0.1%. This was said to be the worst performance in consumer spending since the fourth quarter of 2014.
In the previous quarter, consumer spending was seen at 0.4%. Head of ONS GDP, Darren Morgan said that the weak exchange rate and inflation was hitting the household budgets.
UK Annual GDP Growth Rate: 1.7%, Q2 2017. Source: Tradingeconomics.com
Government spending managed to offset some of the declines from the private consumption. Investments were however seen driven by largely on account of government spending and housing construction. Business investment remained flat for the month. Economists were expecting to see a 0.2% increase.
The UK’s economy is expected to continue in this trend for the remainder of the year. Projections show that the UK’s economy might average a 1.7% GDP annual growth rate this year. But they forecast that GDP could slow to as much as 1.5% in the next year.
The GDP growth rate also puts the UK as the slowest growing economy among the G7 economies. This was broadly attributed to the decision by the UK to leave the EU. The Brexit referendum was seen hitting business investment strongly and stalling any further plans.
Many financial institutions are also looking at ways to move into the European Union. The UK government is hopeful that it will complete the Brexit negotiations by March 2019.
Currently, preparations are underway by UK officials on how they wish to exit the EU. Key points of debate include retaining access to the single market and immigration.
UK retail sales posts fastest decline in a year
Last week, the Confederation of British Industry (CBI) released the retail sales report survey. According to the report, retail sales in the UK fell at the fastest pace in August. Data showed that 44% of retailers reported weaker sales volumes in August compared to the same month the year before. Anna Leach from CBI said that despite the warm weather, retail sales slowed. This was broadly attributed to the stronger inflation which has continued to put a squeeze on UK households.
Wages have remained broadly flat while inflation has overshot the BoE’s 2% inflation target rate, rising to 2.6% last month. Some of the retailers in the survey remained optimistic however noting that they expect retail sales to pick up in September.
Data released a few weeks ago showed that retail sales in July managed to rise 0.3% on the month. This was slightly higher than the forecasts of a 0.2% increase. June’s retail sales figures were also revised down to show a 0.3% monthly increase.
On a year over year basis, retail sales in the UK rose just 1.7%. This was significantly lower from the revised 2.8% increase that was registered in the previous month. Excluding gasoline, retail sales rose 1.5% on the year, which managed to beat the forecasts but was still down from the previous month.
The British pound was seen weakening. The currency had briefly rallied to $1.325 levels in July. The gains came broadly on account of hawkish commentary from the Bank of England back then.
