Second estimate of GDP for the second quarter
On Thursday, the ONS will release the second estimate of GDP for the second quarter of this year, as well as estimates of the key components of GDP from the output, income and expenditure approaches.
The first estimate of UK GDP in the second quarter confirmed the weakening pace of economic growth in the first half of the year. The economy expanded by 0.3% in the three months between April and June, only a fraction higher than the 0.2% growth recorded for the first quarter of the year. Although services accelerated from a lacklustre performance earlier this year, the drag on GDP growth in the second quarter mainly came from the production and construction sectors which both contracted in the three months to June.
The headline GDP growth figures are unlikely to be revised in the second estimate. However, this will give us more insight on the trends in consumer spending for the first half of the year. We expect households' consumption to pick up from the very weak performance earlier this year, but the recovery should be modest as the prospects of higher inflation and weak wage growth are still looming large. Net trade is another key component to watch this week. One year after the significant drop in the sterling in the aftermath of the Brexit vote, the figures will reveal whether this has led to an improvement in the UK's net trade position. Our guess is probably no.
What's happening with business investment?
Business investment for the second quarter of the year will also be published on Thursday by the ONS. EEF's Q2 Manufacturing Outlook showed a bit more optimism on the investment plans of UK companies in the second quarter, also helped by some recovery in offshore activity. UK manufacturers have been responding to a surge in demand - both at home and overseas - in the past year or so, and capacity constraints became more apparent in the recent months. Firms' profits are on the rise - a result of higher inflation and waning pressure on input costs from the dive in sterling, and credit conditions remain loose. In addition, global investment is on a recovery mode and should provide a boost to UK companies' investment intentions. However, the positive outlook for investment is undermined by Brexit uncertainties. This week's estimate should provide useful insight on what all these factors sum up to in terms of companies' decisions to invest.