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Highlights:
- Mixed Economic Signals: Q2 GDP growth in the UK revised down to 0.5%, while stronger business investment and capex were reported.
- Rising House Prices: September saw house prices rise by 0.7% monthly and 3.2% yearly, indicating the impact of recent interest rate cuts.
- Confidence Concerns Persist: Lloyds' business confidence fell in September, with heightened price expectations complicating the outlook for consumers.
The UK has released a variety of economic data this morning, providing a nuanced view of its economic landscape as the country approaches the fourth quarter. The revised report for Q2 GDP revealed a slight downward adjustment, with quarterly growth now recorded at 0.5%, down from the previously stated 0.6%. Additionally, the annual growth rate has been revised from 0.9% to 0.7%. Despite this revision, the UK’s performance remains comparatively stronger than the Eurozone, which reported a growth rate of 0.2%, although it falls short of the growth rate seen in the United States.
The final details of the Q2 GDP report revealed an increase in business investment and capital expenditure, along with a current account deficit that was lower than anticipated, even if it was higher than the previous quarter. In a separate report, Lloyds' business confidence survey indicated a decline in sentiment for September. This drop could be linked to upcoming budgetary considerations, as confidence for the next 12 months showed improvement compared to August. However, short-term concerns remain, particularly regarding rising price expectations, which surged to their highest level in over five years. This trend suggests that businesses may aim to increase prices in the final quarter, posing challenges for consumers and complicating the Bank of England's efforts to manage interest rates.
In contrast to the mixed GDP figures, house price data released for September showed a notable surge. House prices increased by 0.7% month-on-month and rose by 3.2% year-on-year, marking the highest annual rate since early 2023. This uptick indicates the impact of the Bank of England's rate cut in August on the housing market, even as other indicators suggest a weak consumer backdrop.
Overall, the UK economy presents a relatively strong performance compared to its European counterparts, though confidence levels appear to be a lingering concern. Observers will be keen to see if these trends translate into slower growth in the future. Meanwhile, the pound has maintained its position as the strongest performer among G10 currencies this year, experiencing a solid September, despite slipping against the yen. A cautious approach from the Bank of England relative to other central banks is anticipated to provide ongoing support to the pound as the country enters Q4.
