UK GDP growth remains resilient in the third quarter, supported by services-led expansion and consumer spending, despite offsets from car and chemical imports.
UK GDP continued its recent strength with further gains in the third quarter, driven mainly by services. Resilient growth supports the case for a less dovish Bank of England stance, which is supportive for the pound. However, the data confirms an existing trend rather than delivering a surprise, limiting the move.
Stronger UK GDP supports sterling against the dollar, but the dollar's own direction depends on US factors not covered here. The services-led, consumer-backed growth picture argues for a firmer cable, though the offset from car and chemical imports tempers the signal.
Continued GDP strength in the third quarter, with consumers showing real income growth and room to cut savings, points to sustained demand. Stronger growth expectations typically push gilt yields higher as markets price in fewer rate cuts.
UK GDP demonstrated continued resilience in the third quarter, underpinned by a robust services sector. UBS economist Paul Donovan notes that consumers are benefiting from small positive real income growth and retain the capacity to lower savings rates to sustain consumption levels.
Resilient growth, led by services, reduces the pressure on the Bank of England to cut rates quickly, and higher rate expectations typically support the currency.
Modest, because the data confirms a continuation of recent strength rather than a sharp upside surprise.
The resilient, services-led growth profile is supportive of sterling, so the pair would tend to rise, all else equal.
Resilient growth makes deep rate cuts less likely, so 10-year gilt yields would tend to rise.