Summary:
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UK 2nd quarter GDP Q/Q: -0.2% vs 0.0% exp. +0.5% prior
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1st negative reading in 6 years
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GBPUSD revisits recent lows below $1.21
The latest look at the UK economy makes for pretty grim viewing with a contraction of 0.2% seen in the second quarter. This marks the first time in over 6 years that we’ve had a quarterly contraction in economic activity and given the growing threat of a no-deal Brexit that looms menacingly overhead, it would not be at all surprising if the current quarter also shows a contraction - therefore meeting the standard definition of a recession with consecutive drops in quarterly GDP.
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UK GDP in annualised terms fell close to its lowest level since 2010 at 1.2% according to the latest release. A sharp drop in inventories, likely due to unwinding Brexit stockpiling in Q1 the chief cause of the drop. Source: XTB Macrobond
The solid 1st quarter growth of 0.5% owes a lot to companies stockpiling ahead of the 29th March Brexit deadline that never came and it's pretty obvious that economic activity is clearly slowing. The pound has had a fairly quiet week with reports on Thursday that Boris Johnson is plotting an election in the days after leaving the EU on 31st October keeping any hopes of a recovery firmly in check for now.
Industrial and manufacturing production also both fell, with several indicators pointing to a slowdown in the UK economy. Source: XTB Macrobond
The currency fell to its lowest level in over 2 years against the Euro in recent trade and while the GBP/USD is just about holding above the recent lows, the market continues to languish not far from the post Brexit referendum low around $1.20. After tumbling on Monday and falling further on Tuesday, UK stocks have staged something of a recovery with the FTSE attempting to make it 3 consecutive daily gains into the weekend.
GBPUSD remains in a narrow range around the $1.21 handle and not far from the lowest level since the 2016 referendum. Source: xStation
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
