UK: Q4 growth somewhat below expectations

GDP increased by 0.5% q/q in Q4 2014 which is somewhat below expectations as well as our forecast and the forecast by the Bank of England. This was to some extent due to a decrease of output in the construction sector by 0.8% q/q. GDP is thereby 2.7% higher compared to Q4 2013.

Today’s figures support our view of a healthy growth momentum in the British economy. Strong 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 weak inflation outlook suggests that rate hikes are still remote and we do not expect the first rate hike until Q4 2015.

Details, Q4 GDP(preliminary) components:
GDP: 0.5% q/q (Nordea 0.7; consensus 0.6; prior 0.7)
GDP: 2.7% y/y (Nordea 2.9; consensus 2.8; prior 2.6)