–JP Morgan Economists Push Back Rate Hike Call To Feb From Nov
–JP Morgan Economists Say UK Q2 GDP “Tracking Flat”
–Barclays Capital Economists See Just 0.2% UK Q2 GDP Growth
LONDON (MNI) – Economists are expecting UK growth in the second
quarter to be very weak or even non-existent after recent soft activity
data and the failure of the construction sector to rebound in May.
Following Friday’s construction data economists at JP Morgan said
UK Q2 GDP was “tracking flat” and economists at Barclays Capital
predicted it would come in at up just 0.2% on the quarter. This follows
the National Institute of Economic and Social Research’s estimate,
published Thursday, that Q2 GDP growth was just 0.1%.
As JP Morgan economists point out, Q2 growth is running below the
level the Bank of England Monetary Policy Committee forecast back in
May, with the MPC having an implied 0.3% quarterly rise.
Economists have pushed back their rate hike expectations in recent
weeks and JP Morgan are now expecting the first hike to come in February
next year rather than November this, bringing them in line with the
median forecast for Bank Rate in the Market News’ Survey conducted
before the July MPC meeting.
Friday’s data showed construction output rose slightly on the month
in May following a sharp decline in April, but the weak outturn suggest
the sector may not add to GDP growth in the second quarter.
Construction output rose 0.4% on the month on a non-seasonally
adjusted basis in May. Some analysts had been expecting to see a sharper
bounceback following the 12.4% fall in April, which was impacted by the
extra bank holiday.
In the three months to May, output was up a healthy 12.8% but if
one assumes output in June rises by the same as it did last year, 7.4%,
Q2 construction would rise 3.1% on the quarter compared with Q1.
Last year, however, the seasonal adjustment meant that Q2
construction output was lowered on the quarter by 3.3 percentage points
and if there is a similar effect this time this would point to static
growth in seasonally adjusted Q2 construction output.
The JP Morgan analysts note the seasonal adjustment factor for
construction data has ranged between zero and -3.8% over recent years.
There is a high level of uncertainty over what National Statistics will
assume for Q2 construction growth in the GDP numbers, but the JP Morgan
economists say their best guess is it will come in “near flat for the
quarter.”
–London bureau: 0044 20 7862 7491; email: drobinson@marketnews.com
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