FLASH: UK GDP suffering from supply shock
- UK GDP growth increased to 0.3% q-o-q in the ONS’s first estimate of Q2, in line with my forecast and the consensus. Some surprising moves were pencilled in for the industrial sectors in June, but that might be the ONS anticipating revisions.
- This outcome once again falls short of the BoE’s assumption. It is only 0.1pp lower for Q2, but H1 growth is almost half the pace it projected in May.
- Weak GDP should discourage a hurried rate hike, lest the current path proves to be one of deteriorating demand. However, with unemployment falling, it increasingly looks like a negative supply shock, and that is hawkish.
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