UK GDP Surprises with 0.3% Monthly Growth, Contradicting Market Expectations

The United Kingdom's GDP for June has reported an unexpected increase of 0.3% month-over-month, driven primarily by a strong services sector expanding at 0.4% m/m.

This growth is in contrast to the market consensus and TD Securities' own forecast of 0%, which was also echoed by economists who predicted a decline of 0.1%. May's GDP has been revised from -0.1% to flat, making June the sole positive month in Q2.

The quarterly growth rate for the UK economy reached 0.4% q/q, slightly above the Bank of England's projections of 0.3% q/q. TD Securities notes that this growth is at least partially driven by the strength in Q1 and should not be taken as a fundamental growth story.

This latest GDP figure may have limited impact on the Bank of England's monetary policy, according to TD Securities, which suggests that it will not stir those MPC members voting for a hold into choosing to hike rates at their next meeting.