UK Q2 GDP: Still strong, but growth likely to stagnate - Lloyds

Analysts from Lloyds Bank point out that today’s better-than-expected GDP report from the UK of the second quarter shows that growth was strong but they expect stagnation for the rest of the year.

Key Quotes:

“The first estimate of UK GDP for 2016 Q2 saw growth of 0.6% q/q, above consensus expectations though in line with ours, and Q4 of last year aside, the quickest quarterly pace since 2014 Q4.”

“Following revisions in the Q1 Quarterly National Accounts release at the end of June, the estimated pace of growth for Q2 stands out as unusually firm, not least in the context of pre-referendum uncertainty widely assumed to gnaw on growth. The official estimates are notably in some contrast to the slowing economic momentum indicated by, for example, surveys of purchasing managers.”

“Once more data are available on actual activity in June, a downward revision is possible, notably to industrial output. Moreover, the comparatively strong outturn for Q2 points to some compensating weakness in Q3 GDP overall. On the basis of the very early evidence for July so far, we would expect GDP growth to stagnate over Q3 and likely over the second half of the year.”