Friday, July 23, 2010
An unexpectedly large GDP jump
Posted by David Smith at 11:00 AM
Category: Thoughts and responses

It was always likely that at some stage there would be a surprisingly large quarterly jump in GDP, partly as a result of the reversal of de-stocking, and this looks to have been it. GDP jumped by 1.1% in the second quarter, about double what the markets were expecting.

Growth was strong across the board, with services up 0.9%, within which business services and finance rose by 1.3%, government by 0.9% and distribution, hotels and restaurants by 0.7%. You have to feel sorry for transport, storage and communication, which fell by 0.7%. Total production output rose by 1%, despite a drop in electricity, gas and water supply. Manufacturing jumped by 1.6%. The star of the show, however, was construction, up 6.6%.

I mentioned recently that the numbers were starting to point towards growth in 2010 being closer to 2% than 1% and these figures confirm it. Whether they are a game-changer in terms of interest rates remains to be seen. I suspect most MPC members will want to see a little more evidence that this can be sustained. More on the figures here.