UK Economy Stalls in April, with Service Sector Output Slowing

The UK Economy Stalled in April

On Wednesday (June 12), the UK economy was in focus as the Bank of England interest rate decision looms.

The UK economy stalled in April after growing by 0.4% in March. Economists forecast the UK economy to stall at the start of Q2 2024.

According to the Office for National Statistics,

• Services sector output rose by 0.2% in April after increasing by 0.5% in March. Significantly, services sector output advanced by 0.9% in the three months to April.
• Manufacturing production slid by 1.4%, with industrial production declining by 0.9%.
• The UK economy grew by 0.7% in the three months to April compared with 0.6% in Q1 2024.

Bank of England Monetary Policy Implications

The Bank of England will deliver its interest rate decision on Thursday, June 20. Recent UK labor market data signaled a weaker labor market environment. The UK GDP Report for April could raise expectations of a near-term BoE interest rate cut.

Nevertheless, elevated wage growth may remain a concern as Monetary Policy Committee members monitor consumer price trends.

GBP/USD Reaction to the UK GDP Report

Before the UK GDP Report, the GBP/USD fell to a low of $1.27310 before climbing to a high of $1.27472.

However, in response to the UK GDP Report, the GBP/USD rose to a high of $1.28499 before falling to a low of $1.27397.

On Wednesday (June 12), the GBP/USD was up 0.05% to $1.27460.

Up Next

Later in the session on Wednesday, the US CPI Report, FOMC interest rate decision, FOMC economic projections, and FOMC press conference will warrant investor attention.

Economists forecast the US core inflation rate to fall from 3.6% to 3.5% in May. Furthermore, economists predict the annual inflation rate to remain at 3.4%.

Hotter-than-expected inflation numbers could sink investor bets on a September Fed rate cut. Market sensitivity to the US CPI Report will likely intensify with the Fed interest rate decision in focus.

The markets expect the Fed to stand pat today, shifting the focus to the FOMC economic projections and the press conference. More hawkish economic projections could drive buyer demand for the US dollar. However, Fed Chair Powell will have the final say. Forward guidance during the FOMC press conference requires consideration.