Q1 ’23 UK GDP KEY POINTS (PRELIM):
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Q1 UK GDP quarterly estimates of UK real gross domestic product (GDP) show that the economy grew by 0.1% in the first quarter (January to March) of 2023, while estimates monthly data show GDP fell 0.3% in March 2023, after a 0.5% increase in January 2023.
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The services sector grew in the first quarter thanks to information and communication 1.2%, and administrative activities and support services 1.3%. As for other sectors, construction grew by 0.7%, with manufacturing up 0.5% and the manufacturing sector up 0.1%, respectively.
On the consumption side, household spending did not grow during the quarter as incomes continue to be squeezed by high inflation, while there was a positive contribution from gross fixed capital formation from 1, 3%, specifically business and public investment. The UK economy remains 0.5% smaller than before the Covid-19 pandemic.
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OUTLOOK FOR UK GDP GROWTH TO 2023
The BoE yesterday announced an upgrade to growth forecasts as the UK economy remains quite resilient despite households struggling with rising prices. UK Chancellor Hunt confirms his enthusiasm for today’s report saying it is good news the economy is growing but to achieve the government’s growth priority we need to focus on competitive taxes , labor supply and productivity. The BoE also endorsed the chancellor yesterday with fiscal support in Hunts spring budget seen as a supportive factor for the economic outlook.
However, given all the optimism surrounding the UK economy, it is easy to forget that the economy stagnated in February and contracted in March, a sign of slowness and caution. The data for March in particular is a cause for concern, but the Office for National Statistics (ONS) says the UK economy suffered from bad weather during the month. March was the sixth wettest March since 1836, and was seen as a key factor in the poor data as consumers stayed indoors and retail sales suffered.
Source: ONS
Will it be worth keeping an eye on going forward as the UK heads into the summer months and if the decline in February and March continues, or was the weather really responsible for the fall in March in particular?
MARKET REACTION
Initial market reaction to the news saw GBPUSD drop 15 pips before recovering to trade marginally higher on the day around 1.2530. Looking at the bigger picture from a technical perspective, the GBPUSD price was under pressure yesterday around recent highs and the key resistance area around 1.2660. A decline to 1.2500 followed, but the bullish structure remains intact. A daily close of the candle below the 1.2460 level would invalidate the bullish structure and see further downside come into play with support at 1.2360 aligning with the 50-day MA.
Much of this will also be based on general sentiment today, with any demand for shelter likely to see the dollar continue its recent recovery. An improvement in overall sentiment could see a push towards recent highs once again.
GBPUSD Daily Chart, May 12, 2023
Source: TradingView, by Zain Vawda
— Written by Zain Vawda for DailyFX.com
Contact and follow Zain on Twitter: @is over
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