UK | Latest GDP numbers offered a curate’s egg
The latest GDP numbers were a mixed bag. Growth accelerated to a three-month high in September, but this was almost wholly due to higher health output. And past revisions revealed a softer than expected performance in Q3. Burgeoning cost of living pressures will weigh on activity over the rest of this year and into 2022. That said, recent high-frequency data and retail surveys suggest that consumers’ appetite to spend has not run out of steam yet.
What you will learn:
- September’s gain left the economy 0.6% shy of its immediate pre-COVID size in February 2020, the smallest gap since the pandemic began.
- GDP growth in September was heavily dependent on the health sector, where activity was boosted by a big increase in face-to-face appointments at GP surgeries and a surge in Covid testing.
- But with the easy gains from reopening the economy exhausted and policy support being withdrawn, the recovery has entered a much tougher phase.
Terms of trade will lift income but challenge Australian households
Australia's terms of trade (the ratio of export prices to import prices) increased sharply through the pandemic due to a combination of strong demand and disrupted supply in markets for Australia's major commodity exports. We had anticipated a correction in the terms of trade over 2022, but the Russian invasion of Ukraine and associated volatility in commodities markets has seen the terms of trade spike again.Find Out More
Eurozone: ECB minutes indicate that July rate hike is a near-certainty
The minutes from the April ECB meeting confirm the hawkish tilt initiated a few months ago continues to gain momentum. With a majority of the council increasingly concerned about the inflation outlook, this makes an interest rate hike already in July almost certain. This should not come as a surprise, however, as recent developments render hawks' case arguably easier to make.Find Out More