Yael Selfin, Chief Economist at KPMG in the UK, comments on today’s GDP data
“Today’s figures show that GDP rose by 0.3% in May, following a 0.2% rise in April, with good weather propelling retail and wholesale industries according to the ONS. Manufacturing performance was weak, with survey evidence pointing at continued weakness in June, while the construction industry has bounced back since May.
“Our latest survey, however, shows that the boost from the warm weather and from England’s performance in the World Cup will have encouraged household spending on specific categories, and that June’s retail spending was less buoyant than hoped for. We therefore expect overall consumer spending to have picked up only marginally in the second quarter of this year, as meagre rises in households’ real earnings and uncertainties over Brexit hold spending back.
“While the labour market is expected to remain tight and inflation is expected to ease further, there is little scope for real earnings to rise above 1%, unless productivity performance improves, making consumer spending a weak engine of growth over the next few years. The Bank of England’s worry over dwindling spare capacity and surging domestic inflationary pressures may be premature and the MPC may wish to hold off on raising rates until November.”
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