FxWirePro: UK third quarter GDP preview

Today’s GDP figure will be released at 9:30 GMT from the Office of National Statistics (ONS). It is the final reading of the third quarter GDP. The data is of extreme importance as it would represent the performance of the economy over a quarter after the referendum in June.

• The number, however, unlikely to be a key influencing factor for the pound and the FTSE100 as it is unlikely to be a major shift from the previous flash estimates. In addition to that, the focus has now shifted to the politics of the referendum.  Data, other than GDP figure have already shown that the UK economy has performed better than expected. Retail sales, PMI reports, industrial production; all have been better than expected. There has only been weakness in the housing sector so far.

Past trends –

• After the 2008/09 crisis, the UK economy has been growing at the fastest pace among its OECD peers.

• GDP growth reached highest level in second quarter of 2014, reaching 3.2 percent growth on yearly basis. Since then growth has somewhat waned. In last quarter of last year, growth was 2.1 percent y/y, same as the third.

• This year, the economy grew 0.4 percent in the first quarter and by 0.7 percent in the second quarter on a quarterly basis. Flash estimate showed, the economy is set to grow by 0.5 percent in the third quarter.

Expectations today –

• Today, GDP growth is expected at 0.5 percent q/q and 2.3 percent y/y.

Impact –

• The pound is currently trading at 1.225 against the dollar. The sterling has reached our forecasted short-term target of 1.2 earlier this year. We have also forecasted for the pound to drop to parity in the longer run.