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UK GDP Numbers for March Likely to Disappoint the Bank of England

By:
Bob Mason
Updated: May 14, 2023, 07:02 UTC

The UK economy was in the spotlight this morning. BoE Chief Economist Huw Pill will also draw interest after the BoE's optimistic economic outlook.

UK GDP failed to impress - FX Empire

In this article:

It was a busy start to the day on the UK economic calendar. UK GDP numbers for March and Q1 were in focus this morning. The numbers had more significance following the Bank of England’s more positive outlook on the UK economy.

In March, the UK economy contracted by 0.3% after stalling in February. Economists forecast growth of 0.1%. According to prelim figures, the UK economy expanded by 0.1% in Q1. Economists forecast the UK economy to grow by 0.1%. However, the economy expanded by just 0.2% year-over-year versus 0.6% in Q4.

According to the Office for National Statistics,

  • The services sector grew by 0.1% in Q1, with the production sector also seeing 0.1% growth, supported by manufacturing.
  • Consumer-facing services sectors weighed on growth, falling by 0.4%.
  • Manufacturing sector production output increased by 0.5%.
  • However, household consumption stalled in the quarter, while gross fixed capital formation supported growth in the quarter, increasing by 1.3%.

GBP to USD Reaction to UK GDP Report

Ahead of the GDP numbers, the GBP/USD fell to an early low of $1.25068 before rising to a pre-stat high of $1.25629.

However, in response to the GDP Report, the GBP/USD rose to a post-stat high of $1.25197 before falling to a low of $1.25065.

This morning, the GBP/USD was flat at $1.25107.

GBP/USD has bearish reaction to the GDP numbers.
120523 GBPUSD Hourly Chart

Next Up

The Bank of England Chief Economist Huw Pill is on the calendar to speak today.

On Thursday, the BoE delivered a hawkish policy move. Significantly, the BoE had a more optimistic outlook toward the UK economy, noting the economy showed remarkable resilience.

Today’s GDP numbers will give the BoE Chief Economist a platform to discuss inflation and rate hikes.

Looking ahead to the US session, it is a relatively busy day on the US economic calendar. Michigan Consumer Sentiment and Consumer Expectation numbers will be in focus.

Following the Fed’s decision to hike interest rates by 25 basis points, consumer sentiment toward the economic outlook, inflation, and the labor market will likely be focal points.

While the Michigan numbers will influence, we expect FOMC member commentary to draw interest following the latest round of inflation numbers. FOMC member Bowman is on the calendar to speak later today.

Beyond the economic calendar, the banking sector and US debt ceiling-related news will also need monitoring.

 

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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