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MNI (London)
By Jai Lakhani
     LONDON (MNI) - Friday sees the second estimate for UK Q2 2018 GDP data.
Below are five themes for consideration before the release. 
                                   Q1      May         1st        MNI Median 2nd
                                Prior    Prior    Estimate              Estimate
2018 Q2 GDP Second Estimate
(3M/3M%)                          0.2      0.1         0.4                   0.4
2018 Q2 GDP Second Estimate
(3M Y/Y%)                         1.2      1.5         1.3                   1.3
--Recap Of First Estimate: 
     The first estimate points to 0.4% q/q growth and 1.3% 3M Y/Y growth.
However, as noted in previous MNI analysis, services continues to carry overall
GDP, with growth of 0.5% q/q more than offsetting production declining by 0.8%,
the second straight month of negative rolling three-month 'growth'.
--Households Could Have Chance To Replenish Savings: 
     Headline earnings grew by 0.73% in Q2 on a 3M/3M basis- the strongest 3M/3M
growth in just under a year. Household's individual consumption expenditure
increased by 0.4% in Q2 on a 3M/3M basis.
In Q2 2017, the differential between quarterly earnings and consumption growth
rose by 1.37pp relative to Q1 2017. This led to an increase in the savings ratio
of 1.8pp. In Q2'18, the differential rose by 1.17pp relative to Q1'18,
suggesting the possibility of a welcome rise from the record low.
     --2010's Winter Shows Q2 2018 Growth Unimpressive At Best: 
     During Q2 2018, the average temperature of 13.8 degrees celsius (dc) was
more than four times higher than the average temperature in Q1'18. However, GDP
during this period only moved from 0.2% on a 3M/3M basis to 0.4%. Using the cold
winter readings of 2010 show that growth in Q4 2010 was 0.3% and the average
temperature during the quarter was 4.4 dc. During the first quarter of 2011, the
average temperature only rose moderately to 5.7 dc but GDP rose sharply to 0.6%.
This suggests growth in Q2'18 seriously lacked underlying momentum. 
     --Current Account Deficit Widening: 
     The MNI median points to a widening of the deficit to stg18.9bn from stg
17.7bn previously. The last few years has seen sterling depreciation facilitate
a narrowing of the investment income deficit. However, recently, sterling has
not depreciated by as much, suggesting further narrowing is limited, supporting
a widening of the current account deficit. 
     --Q3 Kicks Off Deceptively Strong: 
     The initial reading for July was one of growing strength in GDP, with
growth at 0.6% 3M/3M- the strongest since August 2017. However, as the post-data
MNI 5 Things eluded to, the growth masked a decline in manufacturing for five
consecutive months on a 3M/3M basis. It also showed the trend in new orders in
construction remaining weak despite the strongest 3M/3M growth since February
2017.  Finally, strong services growth stemmed from a volatile motor trade
component which, an ONS official noted, was subject to further examination. In
summary, the picture may not be as rosy as first painted. 
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |