News

UK GDP picks up by 0.6% in Q2

UK GDP picks up as economy growth has exceeded expectations, rising by 0.6% in the second quarter of 2016, compared to the first three months. The growth confirms the UK economy is robust, despite the uncertainty ahead caused by Brexit.

“Today’s GDP figures show that the fundamentals of the British economy are strong. It is clear we enter our negotiations to leave the EU from a position of economic strength,” said Chancellor Philip Hammond [1].

Economists had predicted the data to be relatively strong – a “final hurrah” for the UK economy leading to the EU referendum.

The Financial Times reported that sterling rose temporarily to $1.3145 against the US dollar after the GDP estimate was released at 9.30am UK time, but the pound has since slipped again, falling as low as $1.3091. It is now down 0.2% on the day against the dollar at $1.3105 [2].

Kallum Pickering, Senior UK Economist at Berenberg, told CNBC that the results were ‘a surprise on the upside’. “What strikes me the most is that the economy accelerated heading into the EU referendum,” he said [3].

The increase was mainly due to strong performance from industrial production, which scored an increase of 2.1% along with strong retail figures. Although a slowdown of the economy is expected post referendum, how long it will last depends how rapidly businesses can recover their equilibrium. The strong second quarter rates could also help to ease post-referendum worries.

[1] Independent – “UK GDP growth surprisingly picks up to 0.6 per cent in second quarter of 2016” – Independent.co.uk

[2] Financial Times – “Up then down – sterling’s reaction to UK GDP” – next.ft.com

[3] CNBC – “UK GDP trumps expectations, with Brexit impact unclear” – CNBC.com