UK DATA: Q2 GDP revised up to -0.5% q/q; -0.5% y/y; in line with median
UK economic growth was revised higher as expected in the second quarter
but a fall in household spending and a large impact from falling exports
underlines just how fragile the economy is. The revision was in line
with BOE thinking and from this perspective implies no change to the
rate outlook. Construction and industrial production were the reason for
the up revision. Looking at the expenditure breakdown, the largest drag
on growth came from net exports which cut q/q GDP by 1pp, the largest
drag from the external sector since Q2 1998. Fewer working days due to
the Jubilee won’t have helped here although this probably doesn’t
account for all the negative impact here. Household spending fell 0.4%
on the quarter in Q2 and down 0.8% on the year. Again the Jubilee and
poor weather could be to blame here. Overall, as expected but still poor
with the special factors meaning we’ll see some bounceback in Q3.