United Kingdom: Resilience tested as data mixed – Rabobank

Rabobank's Senior FX Strategist Jane Foley reviews recent United Kingdom (UK) data against Eurozone performance. Foley notes Eurozone Q2 Gross Domestic Product (GDP) at 0.4% q/q and a 0.7% UK upturn in the three months to May. However, UK monthly data show sectoral contractions and composite PMIs in May and June indicating weakness, leaving a confusing backdrop and wide GDP forecast dispersion ahead of the release.

Mixed growth signals and confidence concerns

"Despite the headwinds stemming from the (near) closure of the Strait of Hormuz, the first estimate of Eurozone Q2 GDP registered a better than expected 0.4% q/q."

"In the three months to May, the UK economy managed a 0.7% upturn, compared with the three months to February."

"However, while the monthly May data brought a better-than-expected growth rate of 0.1% m/m, they demonstrate that despite a 0.3% m/m rise in the services sector, both production and construction contracted."

"Moreover, UK composite PMI data for both May and June indicate contraction, perhaps highlighting the dent to confidence stemming from the Iran war."

"This confusing backdrop may explain the wide spread in economists’ forecasts ahead of tomorrow’s release."