UK GDP headlines for the first quarter of 2013 (Prelim):
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The first quarterly estimates of UK real GDP show that the economy grew by 0.1% in the first quarter (January to March) of 2023 while monthly estimates show that GDP fell by 0.3% in March 2023, after an increase of 0.5% in January 2023.
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The services sector grew in the first quarter thanks to Information and communications 1.2%, and administrative and support services activities 1.3%. Looking at other sectors, the construction sector grew by 0.7% with the manufacturing sector by 0.5% and the production sector by 0.1%, respectively.
On the consumption front, household spending did not show any growth during the quarter, as income continued to decline due to high inflation, while there was a positive contribution from gross fixed capital formation of 1.3%, especially commercial and government investment. The UK economy is still 0.5% smaller than it was before the Covid-19 pandemic.
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UK GDP growth forecast for 2023
Yesterday the Bank of England announced an upgrade to growth forecasts as the British economy remains somewhat resilient despite households struggling with rising prices. British Chancellor Hunt confirmed his delight in today’s report stating that the good news is that the economy is growing but to reach the government’s growth priority, we need to remain focused on competitive taxation, employment saving and productivity. Yesterday the Bank of England’s financial advisor also received financial support in the Hunts Spring budget which is seen as a supportive factor for the economic outlook.
However, given all the optimism surrounding the British economy, it is easy to forget that the economy stalled in February and contracted in March, which is a sign of slowdown and caution. Data for March in particular is a cause for concern, but the Office for National Statistics (ONS) says the UK economy suffered from bad weather during the month. March was the 6th wettest March since 1836 as this is seen as a major driver of the weak data as consumers stayed home and retail sales suffered.
Source: ONS
It would be worth paying attention going forward as the UK moves towards the summer months and whether the wave in February and March continues, or is the weather really responsible for the decline in March in particular?
Market reaction
The initial market reaction after the news sent GBPUSD down 15 pips before rallying to trade marginally higher for the day around 1.2530. Looking at the bigger picture from a technical perspective, GBPUSD price was pressured yesterday around the recent highs and key resistance area around 1.2660. This was followed by a sell-off down to 1.2500 but the bullish structure remains. A daily candle close below 1.2460 would negate the bullish structure and see more bearishness with focus on the support 1.2360 which coincides with the 50-day moving average.
A lot of this will depend on the general sentiment today as well as with any safe-haven demand likely to see the greenback’s recent recovery continue. The improvement in general sentiment could see a push towards the recent highs again.
GBPUSD Daily Chart, May 12, 2023
Source: TradingView, prepared by Zain Fouda
— Written by Zain Fouda L DailyFX.com
Connect with Zain and follow her on Twitter: @I finish
