Preliminary UK Q2 GDP Confirms Slowing Economy

By: Victoria Marklew | Fri, Jul 25, 2008
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Today's preliminary Q2 GDP report from the UK showed real growth slowing to 0.2% on the quarter and 1.6% on the year, the weakest in three years and down from 0.3% and 2.3%, respectively, in Q1. A marked fall in construction output, the result of weakness in private house building, was largely to blame - down 0.7% on the quarter. However, the slowdown in the dominant service sector was also notable, with growth of just 0.4% on the quarter and 2.1% on the year, the weakest annual growth in 16 years.

Chart 1

This report will add to expectations that the Bank of England's Monetary Policy Committee will leave interest rates on hold for the next few months.

Easing Credit Growth in Euro-zone

Today's ECB data on credit and money supply showed that the pace of loan growth to the private sector is easing, coming in at 9.8% on the year in June, versus 10.5% in May.

Chart 2

In addition, the headline rate of growth in M3 money supply fell to an annual 9.5% in June from 10.0% the month before.

Chart 3

While the pace of credit and monetary expansion is still high for a slowing economy, the fact that they are easing all-but guarantees that the European Central Bank (ECB) won't be making any more rate hikes in the second half of this year.

 


 

Victoria Marklew

Author: Victoria Marklew

Victoria Marklew

Victoria Marklew
Vice President and International Economist
The Northern Trust Company
Economic Research Department
"The economics of what is, rather than what you might like it to be."
50 South LaSalle Street, Chicago, Illinois 60675

Victoria Marklew is Vice President and International Economist at The Northern Trust Company, Chicago. She joined the Bank in 1991, and works in the Economic Research Department, where she assesses country lending and investment risk, focusing in particular on Asia. Ms. Marklew has a B.A. degree from the University of London, an M.Sc. from the London School of Economics, and a Ph.D. in Political Economy from the University of Pennsylvania. She is the author of Cash, Crisis, and Corporate Governance: The Role of National Financial Systems in Industrial Restructuring (University of Michigan Press, 1995).

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