GDP increased by 0.8% q/q in Q1 2014 which is somewhat below expectations as well as our forecast and the forecast by the Bank of England. The main contribution came from the service sector growing by 0.9% q/q contributing by 0.7% point to GDP. This was the strongest GDP growth since Q4 2007. GDP is thereby 3.1% higher compared to Q1 2013, but still 0.6% lower than its peak in 2008.
Today’s figures support our view of a stronger activity during 2014. Higher growth would give the BoE reasons for early rate hikes, but on the other hand inflation is still below target. Despite better growth prospects the low inflation suggests that rate hikes are still remote and we expect the first rate hike in the middle of 2015.
Details, Q1 GDP components:
GDP: 0.8 % q/q (Nordea 1.0; consensus 0.9; BoE 1.0; prior 0.7)
GDP: 3.1 % y/y (Nordea 3.3; consensus 3.1; prior 2.7)
Nordea