UK GDP not so Deeply Dippy

The service sector seems to have helped UK GDP avoid a triple dip recession. GDP rose 0.3% quarter on quarter which was higher than forecasters expected (0.1%) Over the longer term however the GDP outlook remains challenging.

  • It’s certainly nice to avoid a triple dip recession although the difference between “no growth” and “low growth” is fairly trivial in reality.
  • Consumption has been weighed down by deleveraging as households continue to pay down mortgage debt and boost savings in preference to spending.
  • Weak spending power, as inflation has exceeded wage growth, provides a further headwind for the consumer.
  • Large gains in employment last year have helped to offset the weakness in wage growth.
  • The weaker pound has failed to rejuvenate the export market because the UK’s trading partners are suffering a prolonged slump.
  • Sterling’s weakness has also weighed on discretionary consumption because it has increased the price of food and fuel.
  • Unlike the UK economy, the UK equity market has a more virtuous source of revenues, particularly from the US and emerging markets.
  • We see the very accommodative monetary environment as continuing and remaining supportive for UK-traded investments.

Full article – Market Perspective – UK GDP not so Deeply Dippy – 25 April 2013 (PDF)

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