The decline in growth would normally give the Bank of England reason to pause rate hikes but the UK’s sticky inflation regime makes that unlikely.
UK GDP recorded a larger than forecast fall in July with the wet weather sharply impacting consumer behaviour. GDP fell 0.5% month-on-month versus an expected 0.2% decline. This follows on from the larger than expected growth of 0.5% in June. Strike action from junior doctors impacted the overall services sector but poor weather also kept retail sales in a bit of a slump along with the construction sector. This decline in growth would normally give the Bank of England reason to pause rate hikes but with the sticky inflation regime the UK finds itself in with wage growth accelerating, we do not see that as likely just yet. A further hike next week of 25 bps is still our base case.
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not an indicator for the current or future development.