UK: Q1 GDP growth significantly weaker than expected, BoE to “wait and see”

Today’s GDP data in the United Kingdom came below expectations. Analysts at Wells Fargo now look for the Bank of England to remain on hold until August.

Key Quotes:

“Preliminary data released today showed that real GDP in the U.K. grew just 0.1 percent in Q1 (0.4 percent on an annualized basis) relative to the previous quarter. Today’s print was significantly weaker than expected, with the consensus expecting a 0.3 percent increase.”

“While some of the Q1 weakness may be due to bad winter weather, the slower overall pace of growth raises questions about the underlying health of the British economy.”

“Slower growth in consumer spending likely stems from slower real wage growth even as nominal wages have increased.”

“We look for inflation to continue to recede, which should lift growth in real income and consumer spending.

“In light of today’s weaker-than-expected GDP print, we now look for the Bank of England (BoE) to remain on hold until August, rather than hiking rates at its May 10 meeting. The BoE will likely adopt a “wait and see” approach to examine incoming economic data in the coming months before tightening policy.”

“We look for economic growth to eventually pick up as inflation continues to recede and real wage growth recovers. Stronger growth in the coming quarters should support further rate hikes from the BoE, albeit at a gradual pace.”

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