August GDP release
In July GDP expanded by a reasonable 0.3% after a softer 0.1% increase in June. The main contributors in July were households spending, buoyed by good weather, and continued growth in construction – though rates of increase had eased somewhat from the bounce back in May and June. Manufacturing was the weak point - but more on that is a moment.
Indicators suggest services activity was chugging along at a steady pace in August, but confidence indicators, a weaker borrowing picture and little change in real wage growth points to little in the way of upside for the consumer spending outlook. Similarly, the post-snow construction boost will likely continue to fade.
The data suggested manufacturing didn’t have a great month in July, with output falling by 0.2%. But under the surface it wasn’t all bad, with pharma and machinery driving much of the decline. Given the big swings in the pharma data from month to month, we may well see at least some of the big losses recovered in August. Other indicators for August have been broadly stable, but the dip in the PMI means a recovery in the production index is not guaranteed.
The quarterly data have shown net trade to be a drag on growth in the first half of the year – falling good exports and rising imports were notable contributors in the second quarter. The outlook for exports is particularly fuzzy with the possibility that some stockpiling on both sides of the channel may be underway and the impact of trade tensions on the UK has not yet been evident. The trade data will be worth probing a bit more than usual in the coming months.