Daily Economic Outlook: 28th July 2015

The day's principal data focus will likely be the first estimate of UK GDP in 2015 Q2, expected to confirm that the slowdown in economic activity in Q1 was temporary. While the headline PMIs have in aggregate softened in Q2 relative to Q1, other survey data - such as that from the BCC and CBI - suggest a solid ongoing pace of activity. More importantly, official data for the quarter points to a quicker pace of expansion over Q2, with a notable gain in industrial production in April and May - driven by a surge in oil & gas output - offsetting weak outturns for construction. 

Although the first estimate of GDP is based on data covering only about 40% of the economy's output in the quarter and over time tends to undergo revisions, at this stage of the data cycle a 0.6% quarterly GDP gain is anticipated, says Lloyds Bank. 

Implicit in this is a 0.2% rise in May's index of services, in line with its long run average expansion; a stronger 0.3% gain would suggest the likelihood of a 0.7% print for growth of Q2 GDP, adds Lloyds Bank.

In advance of the tomorrow's FOMC meeting, further colour on activity trends will be provided by the afternoon's US data. Chiming with recent evidence of stronger turnover in the housing market, S&P/Case-Shiller city house price data for the year to May are expected to post a modest pickup in inflation to 5.6% from 4.9% in April. Meanwhile, following an unexpected June surge in consumer confidence readings on the Conference Board's measure, the index is expected to pull back a little in July, dipping to 100.0, estimates Lloyds Bank.