UK Q2 GDP – The calm before the storm

Posted Friday, August 26, 2016 by
Skerdian Meta • 2 min read

The statistics office in London just released the second GDP estimate and the headline figure just came bang on the numbers. The first estimate was 0.6%, the consensus for the second estimate was 0.6% and that´s the number that popped up on the screen. Remember that there are three versions for the GDP, the preliminary, the secondary and the final estimate.

At least the three GDP readings in UK and Europe are much closer to each other in terms of value than the US counterparts. Do you remember the US GDP reading for the Q1? The first estimate was 0.5%, the second was revised to 0.8% and the final number stood at 1.1%. Can you really trust the first and the second estimate?

Back to the UK though. The main headline was pretty good and the other components were even better; the Q2 index of services beat the expectations by 0.1%, while the business investments which were supposed to decline by 0.9% increased by 0.5%.

At first look, everything looks great and in my opinion the economic situation in the UK was pretty good comparing to other developed nations. That was until the Brexit side won and that´s the main reason this economic data can be considered old gun, it might shoot once in a while but always off target. 

No one believed that Brexit would win until the very end of Q2 and the pickup in the business investment shows that. But since then the whole fundamental situation has changed drastically. From what we have seen, the business investment has declined sharply since the end of Q2 and many UK economic sectors are in contraction.

GBP/USD is lower than before the release

So, I´m already past the Q2 GDP and already looking at Q3. The forex market seems to be doing the same with the GBP already in decline after a short-lived spike higher. 

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