UK GDP Estimate MM (Mar) 0.4% vs. Exp. 0.10% (Prev. 0.10%, Rev. 0.2%)

• 
  Services output grew by 0.5% in March 2024, following growth of 0.3% in February 2024 (revised up from 0.1% growth in our previous publication), and grew by 0.7% in the three months to March 2024; services output was the largest contributor to the growth in GDP on both the month and the three months to March 2024.


• 
  Construction output fell by 0.4% in March 2024, following a fall of 2.0% in February 2024 (revised down from a 1.9% fall in our previous publication), and fell by 0.9% in the three months to March 2024.


• 
  Production output grew by 0.2% in March 2024, following growth of 1.0% in February 2024 (revised down from 1.1% in our previous publication), and grew by 0.8% in the three months to March 2024.

Reaction details (07:08)

• Stronger than expected metrics which sparked immediate hawkish reaction in Sterling, sending GBP/USD higher from 1.2519 to 1.2537.


• Modest hawkish move in market pricing when it re-opened (07:30BST), with a handful of bps of easing removed from each meeting but the overall narrative of a first cut being between August and September not shifting.

Analysis details (07:08)

• A stronger than forecast print for the March series and by extension Q1, with upward revisions to February's numbers as well.


• Metrics which confirm that the UK economy has exited the technical recession it found itself in at end-2023, confirming the commentary from Chancellor Hunt in recent sessions.


• Services was strong with widespread growth across the sector which is welcome while Production grew on the month but the sub-sectors saw a 50/50 split and February's numbers were revised down, a development which will be closely watched ahead. Finally, Construction once again fell on the month though the magnitude was much shallower than February's reading but nonetheless remains a point of concern ahead.


• Overall, the data confirms the UK economy has returned to growth but given the mixed developments for Production and Construction in March it remains to be seen if the economy can return to strong growth or remains just above stagnation in the near-term.


• For the BoE, the data will likely spur a modest hawkish reaction in pricing but will not fundamentally change the picture for Threadneedle St. which has already begun weaving a path to easing in the next few meetings.


• Note, the increase in the Quarterly GDP Deflator may add to the hawkish move when BoE pricing re-opens, ONS highlights "Compared with the same quarter a year ago, the implied GDP deflator rose by 4.0%."

10 May 2024 - 07:00- Important- Source: Newswires