FLASH: GDP miss raises the risk of BoE delay
- GDP growth was 0.2pp weaker than expected in Q1 at 0.1% q-o-q. Construction weighed heavily, but the source of surprise was February’s fall in services activity.- The post-referendum trend in monthly GDP(O) has broken to an unusual extent, but I expect the hit to the pace of growth to be short-lived.
- Robust labour market data suggest this GDP weakness is not about underlying demand weakness, so I continue to expect a BoE rate hike in May. However, the probability has fallen, and the hike may be delayed if the PMI fails to rebound.
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