GDP upgrade is 'boost to Burnham' but winter slowdown looms
This morning’s upgrade to UK growth in April-June is a boost to Andy Burnham, analysts say, even though he didn’t take office until almost a month later.
ChrisBeauchamp, chief market analyst at IG, says:
“Still on a post-speech high, the upgraded figure is yet more good news for the UK’s still-new(ish) prime minister.
The highest growth in the G7 for the first half is certainly a headline and one that will help keep nervous MPs in line for a while, plus it helps take off pressure for a new election - why risk it now when things appear to be improving nicely.”
Ashley Webb, senior UK economist at Capital Economics, warns though that growth may slow towards the end of this year:
The upward revision to real GDP growth in Q2, from 0.4% q/q to 0.5% q/q, suggests that the economy has been a bit more resilient to higher energy prices in the first half of the year than previously thought. This resilience may continue into Q3, but we still expect it to fade in Q4 as higher inflation takes a bigger bite out of households’ real incomes.
The 0.5% q/q gain in Q2 real GDP followed unrevised growth of 0.6% q/q in Q1, with the breakdown still showing that the economy is no longer being heavily supported by government spending, which contracted by 0.5% q/q (revised down from -0.3%).
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, agrees that growth will slow over the winter:
“The upward revisions to Q2 GDP growth means the economy was even stronger in the first half of the year than we previously expected, despite the Iran war. What’s more, the composition of growth looks a little healthier. Surveys suggest that much of that positive momentum has been carried forward into Q3 meaning we have revised up our annual GDP forecast to 1.4%.
“However, the next six months looks tougher with potential interest rate rises, a sharp increase in inflation and another tax raising budget all to come. That will drag heavily on growth over the winter.