The British economy scored a Growth of 0.2% in the second quarter of 2023Exceeding agreed-upon expectations of zero growth.
Although this is a low growth rate by historical standards, Positive surprise The growth achieved is significant and shows that The economy was more resilient Than expected.
According to Schroders analysis. Services, building that it Industrial production (including manufacturing) generated a Positive growthwith the largest contribution coming from Production industries. The performance of the manufacturing sectors was particularly strong, recording growth of 1.6%, the fastest growth rate since December 2020.
Increase local demand
A detailed analysis of GDP spending reveals a stronger trend. You Real household spending grew by 0.7%While general government spending increased by 3.1%. Although total investment remained stable, Investing in business It grew 3.4% in the quarter. From the other side, in a counter course, they came from Changes in equity and net tradeThis reduced overall GDP growth by 0.3 and 1.1 percentage points, respectively. This means that domestic demand grew by 1.5% – three times faster than the long-term average before the pandemic.
The release of the results included the presentation of monthly data Recovery in June, as the economy grew by 0.5% after -0.1% in May. Most economists believe that Additional holiday in MayTo celebrate the coronation of Charles III would cause a greater decline in activity, as has happened in the past, on similar public holidays. Doubts have been raised about whether The economy has simply exceeded expectations Or whether coronation celebrations had less impact. a Accelerating economic activity The June report indicates that this was the first scenario and that the economy was more resilient than expected.
There is a need for further interest rate hikes
last week, Bank of England chose to Reduce the frequency of increases to 0.25%But he indicated the possibility of further interest rate increases. The latest GDP data suggest that further monetary tightening is needed to slow domestic demand and thus ease domestic inflationary pressures. Enter gilts It is higher across the curve, as the British pound strengthens against both the euro and the US dollar.
Previously, interest rates were expected to peak at 6.5%, after the rate of increase accelerated. Now the Bank of England wants to move slower and may reach a lower level, around 6%. This is likely to lead to a gradual slowdown in inflation. However, it would not be surprising if the Bank of England was forced to raise interest rates again.
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