{"id":2920,"date":"2009-10-23T10:53:50","date_gmt":"2009-10-23T10:53:50","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2920"},"modified":"2025-03-27T15:48:57","modified_gmt":"2025-03-27T15:48:57","slug":"uk-gdp-shock-insufficient-to-warrant-inflation-downgrade","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2920","title":{"rendered":"UK GDP shock insufficient to warrant inflation downgrade"},"content":{"rendered":"

The shock 0.4% further drop in GDP in the third quarter reflects falls of 0.7% and 0.2% in industrial and services output respectively. Industrial weakness had already been signalled by August production numbers but the services decline is a big surprise and at odds with recent stronger purchasing managers’ survey results (although the coverage of this survey is narrower than that of the GDP figures).<\/p>\n

August monthly figures for services output were also released today. The July \/ August average of this series, which feeds directly into the GDP numbers, was 0.05% below the second-quarter level. To generate a 0.2% quarterly decline, the Office for National Statistics must be assuming a significant output fall in September. This seems odd given the limited information available at this stage.<\/p>\n

The chart plots quarterly GDP together with a monthly proxy based on industrial and services output. After recovering by 0.4% in June and July, monthly GDP is estimated to have slumped by 0.6% in August with a further 0.3% decline in September implied by the quarterly estimate.<\/p>\n

Today’s figures conflict with the MPC’s assessment at its last meeting that “output in the third quarter was likely to be close to the central projection in the August Inflation Report<\/em>” – this projection implied a 0.1% rise last quarter (taking account of a 0.2% upward revision to second quarter numbers). The Committee, however, is likely to be puzzled by the apparent inconsistency with survey evidence and the assumption of a further output fall in September.<\/p>\n

November’s meeting is shaping up to be a cliff-hanger, with GDP weakness offsetting other factors arguing for an increase in the MPC’s inflation forecast, including recent higher-than-expected outturns, better global economic news, stronger asset and commodity prices and a fall in the exchange rate. The two-year-ahead projection based on unchanged policies was above the target at 2.17% in August so the MPC needs to conclude that inflation prospects have improved to justify extending asset-buying. This still looks a stretch, even after today’s number.<\/p>\n

\"\"<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The shock 0.4% further drop in GDP in the third quarter reflects falls of 0.7% and 0.2% in industrial and services output respectively. Industrial weakness had already been signalled by August production numbers but the services decline is a big surprise and at odds with recent stronger purchasing managers’ survey results (although the coverage of […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2920","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2920","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2920"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2920\/revisions"}],"predecessor-version":[{"id":5229,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2920\/revisions\/5229"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}