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Activity data firmer than expected, driven by services, but we don't think it changes monpol

UK DATA
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  • Notable upside surprise to UK GDP with March coming in 3 tenths higher than expected at 0.4%M/M and February revised up from 0.1%M/M to 0.2%M/M. This put the Q/Q print at 0.6%Q/Q versus consensus of 0.4%Q/Q (which had a downward skew) and +0.35%Q/Q BOE forecast (published yesterday).
  • Services was the main upside driver for March (and driver of the Feb revision) with IP /manufacturing also surprising to the upside in March (revised a tenth lower in Feb) while construction fell again (against an expected rise).
  • The ONS notes: "Transportation and storage was the largest positive contributor to the rise in services output in this three-month period, growing by 3.7% in the three months to March 2024. The next largest contributions came from professional, scientific, and technical activities, which grew by 1.3% and admin and support service activities, with output here rising by 1.7%."
  • "The largest positive contribution at the subsector level in services in March 2024 came from human health and social work activities, which rose by 1.1% in the month. This was driven by growth of 1.6% in human health activities. There was no industrial action in March 2024 compared with five days of industrial action by junior doctors in February."
  • We don't think this really will dissuade any of the MPC members from voting for cuts or have any notable impact on the timing of the first cut - but markets have nevertheless seen GBPUSD move around 20 pips higher on the release. We think that CPI data, the passthrough of costs to output prices in the PMI data, and wage data all remain much more important.
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  • Notable upside surprise to UK GDP with March coming in 3 tenths higher than expected at 0.4%M/M and February revised up from 0.1%M/M to 0.2%M/M. This put the Q/Q print at 0.6%Q/Q versus consensus of 0.4%Q/Q (which had a downward skew) and +0.35%Q/Q BOE forecast (published yesterday).
  • Services was the main upside driver for March (and driver of the Feb revision) with IP /manufacturing also surprising to the upside in March (revised a tenth lower in Feb) while construction fell again (against an expected rise).
  • The ONS notes: "Transportation and storage was the largest positive contributor to the rise in services output in this three-month period, growing by 3.7% in the three months to March 2024. The next largest contributions came from professional, scientific, and technical activities, which grew by 1.3% and admin and support service activities, with output here rising by 1.7%."
  • "The largest positive contribution at the subsector level in services in March 2024 came from human health and social work activities, which rose by 1.1% in the month. This was driven by growth of 1.6% in human health activities. There was no industrial action in March 2024 compared with five days of industrial action by junior doctors in February."
  • We don't think this really will dissuade any of the MPC members from voting for cuts or have any notable impact on the timing of the first cut - but markets have nevertheless seen GBPUSD move around 20 pips higher on the release. We think that CPI data, the passthrough of costs to output prices in the PMI data, and wage data all remain much more important.