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Macroeconomic outlook report: UK

Second quarter of 2017

During the second quarter of 2017, UK economy experienced a deceleration to a y/y growth rate of 1.90%, which represents a 0.18 p.p. decrease over the rate of the previous quarter. This performance was driven by the lower growth of household consumption and gross fixed capital formation. The unemployment rate decreased by 0.23 p.p. from the previous quarter, standing at 4.40%, while the employment y/y growth rate slightly decreased by 0.02 p.p. in this quarter when compared to 1Q17 to a 1.09% growth rate. The sterling pound registered a depreciation against the dollar in the second quarter of the year, reaching an exchange rate of 1.16 $/£. Lastly, inflation rose to 2.73% in 2Q17.

Macroeconomic overview

  • During the second quarter of 2017, the y/y growth rate of GDP in the UK stood at 1.90%, which is 0.18 p.p. lower than the rate registered in 1Q17. The main driver of the deceleration of GDP was the weaker growth recorded by household spending and gross fixed capital formation in this quarter when compared to the previous one.
  • General government expenditures accelerated in 2Q17 to a y/y growth rate of 0.56%, up 0.64 p.p. from the rate registered in 1Q17.
  • The unemployment rate decreased by 0.23 p.p. over the previous quarter to 4.40%, thus continuing the downward trend started in 3Q15. On the other hand, the employment y/y growth rate recorded a slight decrease of 0.02 p.p. when compared to 1Q17, registering a 1.09% growth rate.
  • The sterling pound depreciated against the dollar compared to 1Q17, by 0.08 dollars per sterling pound, reaching an exchange rate of 1.16 $/£. Since 4Q15, the sterling pound has accumulated a depreciation of 23.63% against the dollar, which has affected the purchasing power of households.
  • Inflation increased by 0.60 p.p. when compared to the previous quarter, reaching a 2.73% rate. Thus CPI growth stood above the Bank of England’s 2% inflation target. This increase in inflation reflects the pass-through effect to import prices of the sterling pound depreciation, especially to food and energy prices.

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© GMS Management Solutions, S.L., 2018. All rights reserved. The information contained on this publication is of a general nature and does not constitute a professional opinion or an advisory service. The data used in this publication come from public sources. GMS Management Solutions, SL assumes no liability for the veracity or accuracy of such data.