• UK consumer spending rises the least since Q4 2014 in Q2
  • Overall GDP growth matches the first estimate
  • GBPUSD wobbles in the aftermath amid softening consumer spending

The UK economy grew 1.7% yoy and 0.3% qoq in the second quarter this year matching the first estimates. On the surface, growth seems to be beneficial for British assets, however the GDP breakdown discloses a less favorable backdrop. In effect, the pound slipped immediately against the greenback as well as the euro.

link do file download linkThe UK’s GDP breakdown illustrates the least contribution of household final consumption since Q4 2014. Source: Bloomberg, XTB Research

Taking a closer look into the GDP breakdown one could notice that a contribution of household consumption in Q2 2017 was the least since Q4 2014 suggesting that consumers stopped short of spending mainly on the back of mounting political uncertainties stemming from the beginning of Brexit negotiations.

On the other hand, one could spot that a contribution of investments (GFCF) increased 0.4% yoy which was one of the highest figure over the course of last quarters. Nonetheless, keep in mind that the UK’s economy relies chiefly on consumption which accounts for a lion’s share of GDP growth, hence a pick-up in investments was overshadowed by a substantial slowdown in terms of household consumption. In turn, the net exports deducted 0.5% yoy. At the end of the day, let’s add that consumers’ purchasing power during the second quarter of this year was impaired due to a squeeze seen in real wages.

link do file download linkThe GBPUSD slipped immediately after the release but rebounded afterward. Source: xStation5

Looking at the H4 interval of the GPBUSD one could assume that a possible increase towards the nearest resistance area at around 1.2850 could constitute an encouraging selling opportunity. If the pair resumes its downtrend, it could move down to 1.2580 where a more important support zone is placed.