UK GDP Report and Brexit

Posted Friday, November 25, 2016 by
Skerdian Meta • 2 min read

The UK GDP report for Q3 was just released and the first impression is not as bad as many market analysts at the beginning of the third quarter thought it would be. Actually, considering the horrible economic numbers immediately after the Brexit vote, this GDP report is mostly positive.

Do you remember the UK economic data in July and August? The business side of the numbers painted a very gloomy picture as they showed a deep contraction. But that didn't last long. The immediate shock soon wore out and the UK economy bounced back up, at least from the initial shock.

The main headline Q3 UK GDP number came out as expected at 0.5% and at 2.3%, so did the annualized number. These numbers would be slightly positive in a time when global economic growth is very low; in the case of the UK after Brexit, a 0.5% growth in a quarter is better than good.  

That´s not enough, though. Business investment grew 0.9% in Q3 against the 0.6% expected. This seems strange after seeing a massive drop in business activity during the first few weeks after the referendum. Whatever the reason, it is a very good sign.


On the other hand, although the exports grew, they still missed the expectations. Judging by the scale of the GBP decline, the exports must have been higher in my opinion. The weaker Pound has dented the consumption too as it was 0.2% weaker than in the previous quarter, while export dropped a massive 1.5%. 

Another not very bright spot in this report is the wages/salaries, which were expected to go up by 1-9% while the actual number was 1.3%. It´s still a pickup nonetheless, so taking into consideration the panic of the first few weeks after the Brexit vote, all in all, this report is positive and GBP/USD confirmed that by jumping about 40 pips higher following the release. That said, Brexit hasn´t even started yet, so there's more uncertainty on the way which is never a good thing for business.

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