Market Economics | Interest Rate Strategy - BNP PARIBAS ...

Key Data Preview
Chart 11: UK GDP vs Composite CIPS
Source: Reuters EcoWin Pro
Q2 (f) Q1 Q4 Q3
% q/q 0.6 0.3 0.4 -0.3
% y/y 1.1 -0.2 -2.9 -5.3
Services % q/q 0.5 0.3 0.7 -0.2
Ind Prod % q/q 1.5 1.0 0.5 -0.9
Key Point:
We expect a sharp acceleration in headline GDP
growth, helped by strong industrial production.
BNP Paribas Forecast: Improving.
UK: GDP (Q2, preliminary)
Release Date: Friday 23 July
We expect a sharp, albeit short-lived, acceleration in GDP
growth during Q2. Part of the improvement is likely to be
technical. More specifically, widespread snow-related
disruption held back growth during Q1. That should lead to
a snapback during Q2 as output returned to normal.
More generally, the reliable early warning indicators of
growth point to at least double the pace of GDP growth
during Q2. Both the CIPS surveys continued to rise until
mid-Q2, which, given the usual lead times, points to a
catch-up in GDP. Given the tendency for the initial estimate
of GDP to surprise on the downside before being
subsequently revised up, we have aimed low and expect a
0.6% q/q pace of expansion.
The breakdown by output is likely to show a rapid pace of
expansion in industrial production given the recent monthly
data. However, services output has been more subdued.
Given the rolling over in the CIPS surveys in the last month
or so, we suspect that this pace of headline GDP growth
will be temporary and a more pedestrian pace of growth
will resume during H2.
Market Economics 166 July 2010
Market Mover
63
www.GlobalMarkets.bnpparibas.com