BUSINESS LIVE: GDP growth exceeds expectations

Richard Hunter, Head of Markets at Interactive Investor:

The latest release of GDP data shows a UK economy still confused by its resilience, but where growth is marginal and therefore likely to be thrown off track by a succession of rate hikes and possibly more.

“In itself, the reading is positive economically, but at the same time it complicates the decision that the Bank of England now faces in terms of its next interest rate decision, especially if it chooses to tighten further and potentially trigger a recession.”

Wealth managers have been told to justify the fees charged to their funds.

The Financial Conduct Authority said a review of fund managers found that concerns about profitability affect how much clients should be charged.

The rise of passive investing in recent years has fueled competition within the industry, forcing some funds to lower their fees.

Matt Britzman, equity analyst at Hargreaves Lansdown:

The FTSE100 looks set to open lower today, quickly giving up gains from yesterday’s session, despite new GDP data showing the UK economy is not flattening in the second quarter as some economists had predicted.

We owe June to the better-than-expected result, where growth of 0.5% picked up the quarter after a small decline in May. These numbers increase the likelihood of a recession further down the line, but the UK economy seems firmly stuck in a cycle of low growth and with further rate hikes firmly priced in by the markets, there seems to be no immediate way out.

UK investors seem to have taken June’s positive inflationary pressures as a sign of hope, and today’s GDP reading should add to that, with scores for both economic growth and investor confidence rising in early August after three months of successive declines. But there’s no denying that the UK’s inflationary performance sticks out like a sore thumb compared to other global economies, and investors should cling to further rate hikes.

There are further glimmers of hope from the mortgage market, where several major lenders have lowered rates on a range of fixed-term mortgages. Let’s not get ahead of ourselves though, anyone looking to buy a first home, take out a new mortgage, or move house right now is still facing some pretty horrific numbers, and next week’s CPI printout has many to do with it.’

Chief Economist at the Institute of Directors Kitty Ussher:

“This is an encouraging set of data showing that the economy performed strongly in June.

“There was decent growth in both retail and manufacturing, aided by a positive rebound effect from the previous month, when activity had eased due to the extra public holiday for the King’s coronation.

Looking at the full three months of the second quarter, we also see economic growth picking up compared to earlier this year, although today’s initial estimates are subject to revision. In particular, car production has benefited from declining input prices and consumer demand has also proved resilient, helped by the good weather in June.

However, the quarterly figures also show a worrying drop in business investment in ICT and machines after the government’s super discount ended at the end of March. It also shows declining spending on scientific R&D, advertising and market research, which could be an early indicator of trouble ahead.”

The UK economy grew faster than expected in June, with companies citing the extra May holiday as a driver of output, according to data from the Office for National Statistics.

GDP growth came in at 0.5 percent for the month, beating expectations of 0.2 percent, while growth for the second quarter totaled 0.2 percent.

“The measures we are taking to fight inflation are starting to take effect, which means we are laying the strong foundations needed to grow the economy,” said Chancellor Jeremy Hunt.