The British economy recorded level A growth of 0.2% in the second quarter of 2023Exceeding the agreed expectations of zero growth.
Although this is a low growth rate by historical standards, Positive surprise And composition achieved significant growth and shows that The economy was more flexible than expected.
According to Schroders analysis. services, building that it Industrial production (including manufacturing) A. was born positive growthwith the largest contribution coming from productive industries. The manufacturing sectors were particularly strong, growing by 1.6%, the fastest growth rate since December 2020.
Increased domestic demand
A detailed analysis of GDP spending reveals a stronger trend. You Real household spending grew by 0.7%.While general government spending increased by 3.1%. Although the total investment is stable, Business investment It grew 3.4% in the quarter. On the other hand, in a counter-course, came from Changes in equity and net tradeThis reduced overall GDP growth by 0.3 and 1.1 percentage points, respectively. This means that domestic demand grew by 1.5%, three times faster than the long-term average before the pandemic.
The earnings release included the presentation of the monthly data recovery in June, as the economy grew by 0.5% after -0.1% in May. Most economists think so Extra vacation in May, to celebrate the coronation of Charles III, would cause a further drop in activity, as had happened in the past on similar public holidays. Doubts have been raised as to whether The economy has simply exceeded expectations Or if coronation ceremonies had less effect. a Acceleration of economic activity The June report indicates that this was the first scenario and that the economy was more resilient than expected.
More interest rate hikes are needed
last week, Bank of England chose to Reduce the frequency of increases to 0.25%But he indicated the possibility of further interest rate hikes. The latest GDP data indicates that more monetary tightening is needed to slow domestic demand, thus easing domestic inflationary pressures. earnings gilts The curve crossed higher, and the British Pound gained strength against both the Euro and the US Dollar.
Previously, interest rates were expected to peak at 6.5%, after an acceleration in the rate of increase. Now the Bank of England wants to move slower and could go lower around 6%. This is likely to lead to a gradual slowdown in inflation. However, it would not be surprising if the Bank of England were forced to raise interest rates again.
