Yael Selfin, Chief Economist at KPMG in the UK, comments on today’s Q2 GDP data
“Good weather brought with it a little bit more growth to the UK economy, with investment regaining strength in the second quarter. At 0.4%, UK GDP growth surpassed that of the Eurozone’s 0.3% once again, but the weaker economic environment among the UK‘s main export markets took its toll on exports, which contracted significantly in Q2 despite the weaker pound.
“Households‘ spending resolve has remained largely intact in the face of a squeeze on real incomes, Brexit jitters, and a modest tightening in consumer credit conditions in recent months. Low unemployment, steady house prices in most regions, and a buoyant stock market, are likely to be feeding the good vibes, but the risk is that any reversal in asset prices could make households feel exposed and likely to retrench more aggressively than the mild deceleration of 0.2% growth in Q1 and 0.3% in Q2 we have seen so far. Retail sales data for July and a worsening consumer confidence point at an unpromising start to Q3.
“A strong recovery in construction following weather related weakness in Q1 contrasted with worsening performance by manufacturing, with a fall in energy demand thanks to the warm weather partially dampening utilities output. A Royal Wedding, record-sunny weather and World Cup football success helped boost wholesale and retail trade, while transport and communication services also grew strongly. With some of the extra momentum in Q2 driven by a short term recovery from the seasonally cold weather earlier this year, the good fortunes are unlikely to last, and the UK economy is expected to see relatively modest growth as uncertainties around Brexit linger on and productivity performance remains weak. ”
Riku Heikkilä - Consultant
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