![](/sites/spain/files/styles/standard_banner_xs/public/header/axa-im-insight-article-building-g153210812_2.jpg?h=28d63dea&itok=iVdGvxZ3)
UK reaction: Strength continues, but momentum likely will ease in H2
- 15 Agosto 2024 (3 min de lectura)
The recovery continued at a solid pace in Q2, but momentum will probably ease from here. Indeed, while the UK economy posted a chunky 0.6% quarter-on-quarter gain (as expected), activity lost momentum in June, remaining unchanged on the month and suggesting a softer quarter ahead. Note too that the outturn undershot the Bank of England (BoE) Monetary Policy Committee’s upgraded forecast of 0.7% quarter-on-quarter, having continuously outpaced expectations earlier in the year. It is important to remember that this is a first estimate and therefore is subject to revisions, but GDP now looks set to increase by 1.1% this year, a tad below the BoE’S forecast of 1.2%.
While activity showed no growth in June, that masked some divergence at the sector level, with a monthly decline in services output offsetting growth in the production and construction sectors. More broadly though, services activity was up 0.8% in Q2, with 11 of the 14 subsectors growing across the quarter. Business services largely drove growth, with professional, scientific, and technical activities the largest positive contributor. Consumer-facing services, by contrast, fell by 0.1%, reflecting weakness in retail sales, as households volatile weather convinced consumers to stay at home. Industrial production fell by 0.1% across the quarter, driven by a 0.6% drop in manufacturing output. But production output appeared to gain momentum over the quarter, rising by 0.3% on the month in May and 0.8% in June, with manufacturing output the main contributor, rising by 1.1% on the month in June. The increase in the manufacturing Purchasing Managers’ Index to over a two-year high in July suggests this momentum will continue. Elsewhere, construction activity continued to fall, due to a decline in new work, as elevated borrowing costs continued to weigh on the sector.
Looking at the expenditure breakdown, a jump in gross fixed capital formation (GFCF) was a key driver. It rose by 0.4%, driven by increases in an increase in investment in transport and IP products. Business investment, however, fell by 0.1% in Q2, likely because businesses pressed pause on potential investment in the run up to the General Election at the start of July. Household consumption also ticked up, as real incomes continued to recover and inflation returned back to a more normal pace. Note, though, that growth in private spending remains weaker than in the latter part of the 2010s. Elsewhere, government consumption rose by 1.4% in Q2, following no growth in Q1, due to higher activity in defence and education, offsetting falls in health which continued to be hit by strike action. As expected, the support from net trade in Q1 reversed; exports increased by 0.8% on the quarter following five consecutive quarterly declines, driven by a 3.5% rise in services exports. But import volumes jumped by 7.7%, as an increase in capex in transport sucked in goods from abroad.
The pace of the recovery likely will slow from here, as the temporary supply side supports ease. Indeed, most measures suggest underlying growth has been more modest. The composite PMI, for instance, has been pointing to quarterly growth of around 0.2% to 0.3%. That recovery will continue, though, with a further recovery in real incomes - as pay growth continues to outpace CPI inflation and tax and benefit changes filter through – alongside rising confidence, falling interest rates and a fading mortgage hit, should support further increases in household consumption over the coming months.
Business investment should also start to tick up once the new government lays out a more stable backdrop for firms. Overall, the strong start to the year means we remain confident with our forecast for growth of 1.1% this year.
Related articles
Ver todos los artículos
![](/sites/spain/files/styles/364x205/public/header/axa-im-insight-article-city-g466699263_6.jpg?itok=e2v8nfap)
China reaction: Industrial output disappoints; consumers surprise
- por
- 17 Junio 2024 (3 min de lectura)
![](/sites/spain/files/styles/364x205/public/header/axa-im-insight-article-city-g629626804_3.jpg?itok=1fpyIjhc)
China reaction: Stability in CPI, easing in PPI, contrast in demand
- por
- 12 Junio 2024 (3 min de lectura)
![](/sites/spain/files/styles/364x205/public/header/axa-im-insight-article-city-g488005850_1.jpg?itok=BJzlxZCw)
US reaction: CPI notches 2nd confidence builder
- por
- 12 Junio 2024 (3 min de lectura)
![](/sites/spain/files/styles/364x205/public/header/axa-im-insight-article-city-g1137564409_0.jpg?itok=dV8Iywdt)
UK reaction: Growth unchanged in April, but a rise in Q2 is on the cards
- por
- 12 Junio 2024 (3 min de lectura)
![](/sites/spain/files/styles/364x205/public/header/axa-im-insight-article-city-g155445312.jpg?itok=kmEkNPD2)
UK reaction: Tentative signs things are moving in the right direction
- por
- 11 Junio 2024 (3 min de lectura)
![](/sites/spain/files/styles/364x205/public/header/axa-im-insight-article-city-g1137865278_6.jpg?itok=be7hycja)
US reaction: US payrolls in ground hog day surprise
- por
- 07 Junio 2024 (3 min de lectura)
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.
All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document.
Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
© AXA Investment Managers 2024. All rights reserved
Advertencia sobre riesgos
El valor de las inversiones y las rentas derivadas de ellas pueden disminuir o aumentar y es posible que los inversores no recuperen la cantidad invertida originalmente.