U.K. economy likely to see trend-like growth in 2018

The U.K. economy is expected to see a trend-like growth in 2018 at around 1.5 percent on a year-on-year basis, noted Scotiabank in a research report. Against a backdrop of zero real household disposable income growth in the first half of the year and ongoing Brexit uncertainty; trend like growth would be an achievement.

Above potential growth is not on anyone’s radar, in spite of ongoing accommodative monetary policy. The first quarter was weighed down by adverse weather conditions, holding back the quarterly growth rate to just above zero.

“We expect normal service to be resumed during Q2, with output expanding by just under ½ percent q/q. We have not assumed any making up for lost output during Q1; merely a resumption of trend like growth. We are moderately more optimistic about the pace of expansion over the second half of the year, mainly a reflection of the likely improvement in household real disposable incomes”, stated Scotiabank.

In the near term, the focus is expected to be on the introduction of the new monthly GDP estimates from the ONS. While the second quarter economic growth is likely to be strong, the monthly GDP print for three months to May is expected to be barely above zero, added Scotiabank. This would suggest that the surprise softness in the first quarter of the year was not just a weather impact and that something more fundamental might be at work.

At 20:00 GMT the FxWirePro's Hourly Strength Index of British Pound was highly bullish at 112.805, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 29.2549. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex