Return to Insights

UK Economic Output Slumps

UK economic output contracts, weather impacting markets, and release of US inflation figures.

This morning, the ONS showed that the UK economic output contracted 0.5% between June and July as strikes and wet whether caused major headwinds across the country. This marked a greater-than-expected contraction, given that the general market consensus had forecast a drop of 0.2%.

Today’s print indicates that the services sector fell half a percentage point as health activities plunged 3.4% with the ONS citing the cancellation of appointments and procedures. For example, the ONS said that “NHS England reported that 65,557 appointments and procedures were cancelled because of the senior doctors strike and 101,977 acute inpatient and outpatient appointments were cancelled because of the industrial action by junior doctors”. As we looked at yesterday, the ONS also indicated that there were some 281,000 working days lost sue to industrial action in July 2023 with most of the strike action being in the Education and Health and social work sectors. Next, the ONS citied a fall of 2.1% in the information and communication sector as a major drag behind the print. Indeed, notwithstanding how the poor weather over July kept Brits at bay for much of the month, computer programming services also slumped 3.4%.


Elsewhere, the country’s retail trade also fell 1.2% while production and manufacturing fell 0.7% and 0.8%, respectively. This comes as households and businesses adjust to monetary conditions being at their tightest levels since 2008, with expectations of further hikes to come.

Today’s print also marks a considerable downturn from the previous month-on-month print of 0.5%, which was helped by an upbeat film and TV industry, along with the popularity of live events especially given the sunny weather seen over June. Some good news though included that the sports activities and recreation activities industry rose 12.4%.

Last month, the Bank of England’s monetary policy report noted that while they are no longer forecasting a recession, output will continue to remain sluggish over the next two years. Such projections views are of course a considerable improvement from their assessments last year which pointed to eight consecutive quarters of economic contraction (starting in Q4 2022). As such, the UK economy – like many of its European and North American counterparts – is expected to see a ‘softer-than-expected’ landing. Focus now turns to the UK inflation print on 20 September ahead of the BoE’s interest rate decision on 21 September where money markets are implying that there is around a 78% chance of a 25bps hike priced in.


The Impact of Weather?

Another GDP print has seen the ONS indicate a strong correlation with economic output and weather. Indeed, the ONS also citied the impact of July’s poor weather behind UK retail sales slipping 1.2% between June and July while slumping 3.2% on an annualised basis. According to the Met Office’s monthly climate summary, the UK had 170.0% of the average rainfall for the month. This made it provisionally the wettest July since 2009 and the sixth wettest July on record since 1836. Regarding today’s print, the ONS stated that the “wet weather was cited as a reason for lower output in retail, as described in our Retail sales bulletin, and also in construction and outdoor accommodation venues”.

All Eyes on US Inflation

Today will see the release of US CPI, which is expected to increase marginally from last month’s print of 3.2% (annualised headline) to 3.6%. Ahead of today’s release, markets are considering the impact of higher oil prices and indications of supplies being tighter. On a month-on-month basis, US CPI is also expected to increase 0.6 percentage points, which if released would mark the greatest uptick in monthly inflation since June 2022. Annualised core inflation is however expected to slip from 4.7% to 4.3% on an annualised basis, as shelter and service inflationary pressures are expected to ease. If the 4.3% figure comes into fruition, this would mark the lowest level since September 2021.

Today’s inflation print comes ahead of the Fed’s next interest rate decision on 20 September, though money markets are implying that there is a 7% chance of a 25bps hike priced in. As such, focus now turns to US CPI released at 1330 this afternoon.

Ready to talk FX?

Get in touch with one of our friendly and knowledgeable experts to see how FX strategy can drive commercial impact in your business.

Contact us


Find out how we have helped our clients meet their hedging requirements.

Morning Update

Travel Tuesday, weekend news from the UK centers around the election, Jeremy Hunt attends G7 finance ministers meeting, Biden receives a hit for concentrating on the 'wrong issues' ahead of the election, and what's happening this week.

UK Retail Sales Slump Despite Rise in Consumer Confidence

Friday feeling, second consecutive contraction for UK retail sales which come in lower-than-expected, potential for energy bills to reach lowest levels in two years, and a look at the seats that will sway the election.

Snap Election Special

Thought for Thursday, 4 July will see snap election in the UK, price action of sterling gives muted response to election announcement, Sunak keeps to assumption of election in second half of 2024, and more MP's than at any time since 1997 not seeking re-election.

UK Inflation Surpasses Expectations

Word of the week Wednesday, expectations surpassed by UK inflation, Rishi announces today's inflation rate release as a "major moment for the economy", and benchmark rate unchanged by Reserve Bank of New Zealand.

Protests in Georgia in Focus

Travel Tuesday, political turmoil in Georgia sees continued protests, application for an arrest warrant for Israeli Prime Minister and his Defence Minister announced by ICC Chief Prosecutor, and softer-than-expected German PPI.

Morning Update

Macro Monday, reports on helicopter crash that killed Iranian president, house prices continue to rise in the UK, new president sworn in for Taiwan, and what's happening this week.

Morning Update

Friday feeling, record highs for copper prices, Dow Jones surpasses 40,000 points for the first time in history, French unemployment holds at 7.5%, and today's focus on Eurozone inflation.

Morning Update

Though for Thursday, Xi visits Moscow to meet with Putin, Washington's tariffs have implications on China, latest inflation data from the US, and yesterday's attempted assassination on Robert Fico.

Find out more about our foreign exchange solutions
Contact us