Share This Story
ECONOMIC DATA ANALYSIS - UK GDP GROWTH LIKELY FLAT IN Q1
ECONOMIC DATA ANALYSIS FRIDAY 19 APRIL 2013
UK GDP GROWTH LIKELY FLAT IN Q1
• UK Q1 GDP likely to show activity flat, depressed by short-term factors
• US Q1 GDP to post rosier Q1, but fiscal restraint set to weigh on activity
• Euro area focus on PMIs and outlook for Q2, but region looks still in recession
Policy debate most important ... As we suggested, this week was dominated by the global policy debate, sparked by the release of key IMF publications. The Global Financial Stability Report stressed the risks of persistent super-loose monetary policy, without advocating any region to pare back on accommodation. More contentiously, the IMF’s support for deficit reduction appears to have waned further, with clear resonance for the UK. The coming week sees focus return to economic releases, particularly the first estimate of Q1 GDP in the UK and US and business surveys for April, including ‘flash’ PMIs from the euro area and China.
UK to avoid contraction? ... UK Q1 GDP is published on Thursday. After some signs of a firming in underlying growth, headline activity looks set to be affected by transient factors including unusually severe wintery conditions and a slower-than-hoped rebound in North Sea oil production, following the slump in Q4. On balance, we forecast GDP unchanged on the quarter. However, the scale of the weather impact on construction and services is as yet unknown and there is a risk of a softer number. These temporary constraints look to have lifted in early Q2, which should result in a pick-up in Q2. Moreover, we continue to expect signs of an acceleration in economic activity, driven in part by a lower level of sterling and some policy inspired revival in business investment and housing activity. We expect growth of around ¾% in 2013, with notably firmer activity in H2.
US Q1 GDP shine to fade ... The US also posts Q1 GDP in the coming week. In contrast to the UK, our global team forecasts a robust 3.1% (annualised) growth rate. This looks to have been driven by an acceleration in household spending, despite the increase in payroll taxation at the start of the year and the subsequent Sequester. However, the latest evidence points to weaker activity towards quarter-end. It is unclear how much of this is temporary, for example reflecting worse weather and Easter effects, and how much is a reaction to fiscal tightening. Looking ahead, we expect growth to dip below 2% in Q2 (particularly as Q1’s expected inventory boost is not repeated), before growing in excess of 2% for the rest of the year to deliver growth of around2% in 2013.
Euro area outlook still recessionary... We have to wait another couple of weeks for the first estimate of euro area Q1 GDP. The outlook is for a further modest contraction, following the 0.6% drop in Q4. The coming week will focus on April’s ‘flash’ PMIs and starts to draw attention to activity in Q2. We suspect that the weakness in March’s figures was exaggerated by temporary factors, particularly in France. Accordingly, we are looking for a modest pick-up in April’s headline PMIs. However, these still look consistent with ongoing recession in euro area activity in Q2, which in keeping with a softening inflation outlook, is likely to heap further pressure on the ECB to provide more stimulus over the coming months. Separately, our global team forecast a modest rise in the German IfO survey, which supports the view that the German economy will continue expansion this year despite broader euro area contraction.
China PMI draws global focus ... After slightly disappointing Q1 GDP in China (although at 1.6% on the quarter, only disappointing by Chinese standards), markets will watch the ‘flash’ PMI on Tuesday for signs of acceleration into Q2. Overall, attention is expected to return to economic releases in the coming week, but the focus is still very much on the prospects for global growth
This document, its contents and any related communication (altogether, the 'Communication') does not constitute or form part of any offer to sell or an invitation to subscribe for, hold or purchase any securities or any other investment. This Communication shall not form the basis of or be relied on in connection with any contract or commitment whatsoever. This Communication is not intended to form, and should not form, the basis of any investment decision. This Communication is not and should not be treated as investment research, a research recommendation, an opinion or advice. Recipients should conduct their own independent enquiries and obtain their own professional legal, regulatory, tax or accounting advice as appropriate. Any transaction which a recipient of this Communication may subsequently enter into may only be on the basis of such enquiries and advice, and that recipient’s own knowledge and experience. This Communication has been prepared by, and is subject to the copyright of, Lloyds. This Communication may not, in whole or in part, be reproduced, transmitted, stored in a retrieval system or translated in any other language in any form, by any means without the prior written consent of Lloyds. This Communication is provided for information purposes only, and is confidential and may not be referred to, disclosed, reproduced or redistributed, in whole or in part, to any other person. This Communication is based on current public information.
Whilst Lloyds TSB ank plc (“Lloyds TSB”) and Bank of Scotland plc ("Bank of Scotland") have exercised reasonable care in preparing this material and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the facts and data contained herein.
This material has been prepared for information purposes only and Lloyds TSB, Bank of Scotland, their directors, officers and employees are not responsible for any consequences arising from any reliance upon such information. Under no circumstances should this material be treated as an offer or solicitation to offer, to buy or sell any product or enter into any transaction. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Lloyds TSB or Bank of Scotland Relationship Manager for clarification.
Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC32700. Authorised and regulated by the Financial Services Authority under registration numbers 119278, 191240 and 169628 respectively.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."