With economic data being on the weaker side, and surveys not suggesting any imminent improvement, we think that the Bank of England is likely to remain prudent and abstain from raising the Bank rate at this month’s meeting.
Looking at activity data, we note the weak expansion in first quarter GDP data (+0.1%), which was not exclusively due to adverse weather conditions and is far below the Banks’s forecasts (1.9%). As confirmed by the ONS in its press release, the sectoral impact of snowfalls in late February and March was small.
We also note the dismal activity in construction (-3.3%). More positive was output in industrial production (+0.7%) and in the services sector (+0.3%).
Regarding the latter, surveys show that domestic demand is likely to remain subdued, with consumer confidence indicators suggesting no improvement in sight. In terms of levels, confidence remains in line with its long-term average while the gap between a more positive assessment for personal situation (above average) with more downward general economic situation (below average) remains in place.
Gero Jung – Chief Economist – Mirabaud AM