UK: soft June survey data signal weaker economic momentum

Latest economic data are in line with more subdued economic activity, with surveys pointing to an overall GDP growth rate of 1% during the second quarter.

‘Hard’ economic data – including industrial production and construction output – point to weaker growth last quarter, and the more generalized fall in June surveys – including in surveys – similarly point to more subdued activity.

We note from June PMI surveys that it is particularly domestic activity indicators that remain weak, while the more forward looking indicators call for prudence. According to the services PMI, new business fell (-3.3 points to 54.1) while business expectorations were down more than four points to 63.7. A more positive note emerged from the employment index.

As to monetary policy implications, those Bank of England members that were pleading for higher rates will be disappointed, in line with our scenario that foresees a cooling in economic activity. This argues for a prudent BoE monetary policy going forward with no rate hikes forthcoming this year or next.

Gero Jung – Chief Economist – Mirabaud AM