MNI DATA SURVEY: UK Q3 GDP, Q3 Current Account, Oct IOS

By Jamie Satchithanantham

     LONDON (MNI) - Third quarter GDP is expected to be confirmed at 0.4% q/q,

1.5% y/y (see table below) on Friday but as we approach the end of the year,

data for Q3 is arguably of little relevance in terms of painting the most

up-to-date picture of the UK economy.

     Absent any major revisions to the Q3 numbers, the Index of Services October

figures, published alongside the GDP numbers, will garner more attention as they

will provide the best indication of how growth fared Oct-Dec. 

     Services accounts for just under 80% of total UK output with the remaining

20% attributed to production and construction. The Index of Production was flat

on the month in October(though that came after very strong performances in prior

months) while the construction sector has continued to be the worst affected

since the Brexit vote after output fell for a second straight month by a hefty

1.5% m/m.

     Soft data surveys show the service sector expanding but at a slowing pace.

After rising to a 6-month higher of 55.6 in October the CIPS/IHS Markit Services

PMI edged down to 53.8 a month later. Considering this, analysts judged that

services output likely grew a steady 0.2% on the month in October, after a 0.1%

rise in September. 

     All-in-all, it points to fourth quarter GDP growth somewhere between 0.3%

q/q and 0.4% q/q. This is in line with the BOE MPC's thinking though they see

downside risks tipping the balance. Minutes from the December monetary policy

meeting said they saw Q4 growth coming in "softer" than the Q3 0.4% q/q result. 

---------------------------------------------------------------

                         2017 Q3    2017 Q3       Oct       Oct

                       Final GDP  Final GDP        UK        UK

                        Estimate   Estimate  Index of  Index of

                            rate       rate  Services  Services

                           % Q/Q      % Y/Y     % M/M     % Q/Q

Date Out                  22-Dec     22-Dec    22-Dec    22-Dec

Median                       0.4        1.5       0.2       0.3

Forecast High                0.4        1.5       0.2       0.4

Forecast Low                 0.1        1.5       0.1       0.3

Standard Deviation           0.1        0.0       0.1       0.0

Count                         16         12         7         5

Prior                        0.4        1.5       0.1       0.4

Bayern                       0.4        N/A       N/A       N/A

Barclays                     0.1        1.5       N/A       N/A

Capital Economics            0.4        1.5       0.2       0.3

Credit Suisse                0.4        1.5       N/A       N/A

Commerzbank                  0.4        N/A       N/A       N/A

Daiwa Capital Markets        0.4        1.5       N/A       N/A

HSBC                         0.4        1.5       0.1       0.3

Investec                     0.4        1.5       N/A       N/A

JP Morgan                    0.4        1.5       0.1       N/A

Lloyds TSB                   0.4        1.5       0.2       0.3

Natixis                      0.4        1.5       N/A       0.4

Oxford Economics             0.4        1.5       0.2       0.3

Pantheon                     0.4        N/A       0.1       N/A

Scotia                       0.4        1.5       0.2       N/A

Standard Chartered           0.4        N/A       N/A       N/A

Societe Generale             0.4        1.5       N/A       N/A

     A deterioration of net investment flows in 2016 meant that the current

account deficit accounted for nearly 7% of GDP. The deficit has narrowed since

then and in Q2 2017 accounted for roughly 4.6% of GDP (or stg23.2bn).

     Although it remained elevated this downward trend should have continued

into Q3 and should show up in the next update also due Friday. 

     The weaker pound should have continued to boost net trade (though probably

by not has much as one would have hoped) while stronger overseas demand will

also have likely improved the net trade balance too. More crucially, net

investment flows will show an improvement.

     In 2016 investment outflows to overseas investors were healthy, owing

largely to the then more robust UK economy and the resulting higher dividends

and profits. Inflows, on the other hand, were weaker as growth among the UK's

primary trading partners (particularly the Eurozone) lagged behind somewhat.

     Now that situation has reversed. UK economic growth has slowed, amid the

friction generated by the ambiguity surrounding UK's future trading arrangements

and its materially poorer consumers, while that of the EU and other economies

has flourished. Alongside a increase in oil prices, which will boost profits of

UK investments in overseas commodities, the deficit will likely narrow again.

     Taking the median of analysts responses in an MNI survey, a further stg2bn

improvement could materialise which would take the current account deficit to

stg21bn. 

     Also worthy of attention in Friday's release will be the latest update on

the UK household savings ratio, which stood at 5.9% in Q2.             

---------------------------

                    2017 Q3

                    Current

                    Account

                     stg bn

Date Out             22-Dec

Median                -21.0

Forecast High         -18.9

Forecast Low          -25.5

Standard Deviation      2.4

Count                     7

Prior                 -23.2

Capital Economics     -21.8

HSBC                  -25.5

Investec              -18.9

Lloyds TSB            -20.9

Pantheon              -21.0

Standard Chartered    -25.0

Societe Generale      -21.0

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

[TOPICS: MTABLE,MABDT$,M$B$$$,M$E$$$]