AusForex's six major institutions look forward to the UK's economic prospects, why are there still different views?

Analysts and economists are divided on the outlook for growth in the UK, which recorded growth in June and Q2. This article lists the views of six institutions, including Barclays.

The UK recorded economic growth in June and Q2, and analysts and economists are divided on the country's economic growth prospects. Here are the views recently released by the six major institutions, as follows:1. Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics:

"June's 0.5 per cent month-on-month GDP growth was driven by big increases in manufacturing and construction output, which are particularly sensitive to changes in the number of working days. May was one day less than usual because of the king's coronation."

"While higher interest rates have put pressure on companies to reduce inventories and the recent appreciation of sterling will put modest pressure on exports, these factors are unlikely to weigh on GDP growth as strongly as they did in the second quarter."

"As a result, we still think the economy will avoid recession, with GDP growing 0.3 per cent in the third and fourth quarters compared with the previous quarter."

2. Barclays economist Abbas Khan said:

"While a mechanical rebound has been expected in June as the extra bank holiday for the king's coronation dragged down May readings (-0.1% month-on-month), the magnitude of the rebound is uncertain given the size of the impact. In this context, the stronger June rebound suggests that the economy has been more resilient at a deeper level than people thought."

"This resilience may temporarily reverse in the short term due to the particularly wet weather in July, but a 17 per cent fall in household energy bills in the third quarter will further boost real household disposable income, which is unlikely to be fully offset by the recent drag from the mortgage cash flow channel. This could drive further growth in discretionary services in the future."

3. Andrew Goodwin, chief UK economist at Oxford Economics:

"The strong start to the current quarter means that even very modest growth over the summer will keep growth at around 0.4 per cent in Q3 (in line with the Bank of England's latest forecast). The number of normal working days in the quarter will also help, as will the resolution of some public sector wage disputes and the nearly 20 per cent drop in energy bills in July."

"June's GDP growth brought second-quarter growth to 0.2 per cent quarter-on-quarter, slightly above market consensus and BoE forecasts, if still broadly in line with the economy over the past 18 months."

4. Sandra Horsfield, economist at Investec Economics:

Money markets have not shown a significant reaction to the data, with peak bank rates still estimated at around 5.75 per cent and the implied path of interest rates through 2024 little changed. As a result, we tend to see an overall rise in UK yields (around 8 basis points) as this is more relevant to the weak performance of the 30-year Treasury auction and the movement of Treasuries after the European close. "

"Our own view is that today's GDP data may, to some extent, reinforce the Bank of England's concern that it may be too early to stop tightening. But with one-off factors playing an important role, most attention will be on CPI inflation and labour market data, with the next set of data due this week."

5. Emma Wilks, UK economist at Lloyds Commercial Bank:

"Looking ahead, the slowing momentum in the business activity survey suggests that the second half of the year could be more challenging. However, with inventories down and the volume of industrial activity slowing in the first half, growth is likely to be stronger even if overall demand moderates slightly."

"The Bank of England has raised its forecast for overall growth in 2023 to 0.5 per cent, but weak supply growth and a weakening of the positive impact on households of fiscal support through 2024 and beyond mean the UK economy is likely to grow at a lower rate than before the epidemic."

"For now, stronger-than-expected output in the second quarter is unlikely to bring much comfort that UK interest rates have peaked, relative to the Bank of England's + 0.1% quarter-on-quarter forecast."

6. Chester Ntonifor, Chief FX Strategist at BCA Research:

"The UK overnight index swap (OIS) curve now reflects a peak of 5.75 per cent by April next year, followed by immediate cuts to 4.99 per cent by the end of 2024 and 4.15 per cent by the end of 2025."

"In our view, market expectations for UK interest rates are incorrect in both directions. The Bank of England is likely to raise rates by only another 25 basis points at its next policy meeting in September, bringing this cycle's top rate to 5.5 per cent."

"The Bank of England will also cut interest rates more aggressively than market discounting in 2024 and 2025 in response to a possible UK recession and sharply reduced inflation, which will require rate cuts to more stimulative levels."GBP/USD daily chart

At 16:00 on August 14, Beijing time, the pound against the dollar was 2695/97