Barclays: Looking ahead, we maintain our forecasts for a consumption led slowdown in the UK

The expenditure breakdown of Q3 GDP leaves us puzzled. Investment and government consumption were the only components printing in line with advanced indicators. In the case of Investment, weakness was already apparent in residential construction as well as investment intentions series, and the upside revision of capex in H1 may have generated some extra weakness in H2. But the overshoot in consumption and the undershoot in net trade were not flagged by any advanced indicators. If anything, retail sales pointed to a slowdown and surveys to the same momentum as Q2. While at the margin consumers upgraded their assessment on major purchases (cars for instance), the rebound in consumption in Q3 goes beyond that. The same holds for net trade where the strength of manufacturing confidence (output and orders) pointed toward solid export growth, not to a contraction in goods exports in particular. Against this background, we will be waiting for the third GDP release to fine tune our forecast and treat today’s release mostly as quarterly volatility. Our view that consumption and investment are bound to slow further, while net trade prints a positive contribution to GDP remains in place.

23 Nov 2017 - 15:54- Economic Commentary- Source: Barclays

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