UK GDP Estimate MM (Oct) -0.3% vs. Exp. 0.0% (Prev. 0.2%); falls in every sector (services, construction & production)

• Services output fell by 0.2% in October 2023, driven by a fall in information and communication, and was the main contributor to the fall in growth in GDP; this follows growth of 0.2% in September 2023.


• The construction sector fell by 0.5% in October 2023 after growth of 0.4% in September 2023.


• Production output fell by 0.8% in October 2023, driven by widespread declines in manufacturing, after showing no growth in September 2023.

via ONS

Reaction details (07:07)

• Softer than expected growth data which sparked immediate pressure in GBP/USD, sending Cable down from 1.2556 to 1.2526. While Gilts are not currently open, Bunds saw some modest upside lifting by around 10-ticks over a five minute period after the release.

07:30GMT

• When market pricing for the BoE recommenced, a modest dovish shift was seen with total 2024 easing lifting to 93bp (prev. 88bp).

08:00GMT

• The commencement of Gilt trade saw the benchmark gap higher from Tuesday's 98.73 close to a 99.02 open before extending to 99.48 thereafter. 

Analysis details (07:10)

• Data which comes ahead of the BoE on Thursday, where expectations are for rates to be left unchanged at 5.25%. While the growth metrics are poor, they are not likely to have any sway on the December announcement. However, it is plausible the metrics could factor into the vote split (exp. 6-3, hawkish dissent) or the extent to which the statement pushes back on pronounced dovish market pricing. As it stands (and yet to react to the growth data) 88bp of easing is pricing across 2024 i.e. three 25bp cuts prices and around a 40% chance of a fourth; with the first reduction seen in June.


• Looking ahead, Pantheon writes that while the October metric has GDP 0.1% below the Q3 average, activity is expected to pick up across November and December and thus forecast Q4 GDP to be unchanged Q/Q. Thereafter, for 2024 as a whole Pantheon forecasts growth of 1.0% Y/Y (exp. 0.5%), though the likes of Capital Economics look for upside of just 0.1% given the economic remains very subdued.

13 Dec 2023 - 07:00- Fixed IncomeData- Source: Newswires