There are a couple of reasons why UK GDP data for August due out next week is unlikely to make much difference at the Bank of England’s November meeting. The first is that it has been uselessly volatile lately and it appears that this is not entirely (or even partially) related to the additional May bank holiday. An unusual rise in the manufacturing sector in June was partially reversed in July, while we have also seen the growing impact of strikes on the numbers. But that’s not the whole story, and we saw a widespread decline in service sector activity in the first part of the third quarter.
We expect a very slight rebound in GDP next week, but our confidence in these figures is low. Our best guess is that when we add August and September, we will see an overall quarterly GDP drop of 0.2%. But even leaving volatility aside, the Bank of England is simply not that focused on activity anyway and, by its own admission, is looking at services inflation, private sector wage growth and the relationship between vacancies and unemployment as a guide for their policies. . The three indicators will be published on October 17 and 18. Barring any major bullish surprises, we believe the Bank will be content to keep rates unchanged again in November.