UK GDP to Test Pound Strength

The first snapshot of the U.K. economy’s health this year will test the strength of the pound, which has been making headway recently after plunging in the immediate aftermath of the Brexit vote.

Due Friday, the first-quarter report on gross domestic product is expected to show the slowest pace of growth in a year, highlighting that British shoppers are feeling the pinch from rising prices.

“Consumers seem to be feeling the adverse effects of the post-referendum drop in the exchange rate, given that it’s pushed up import prices. We are seeing prices on the High Street rising quite sharply,” particularly food and fuel prices, said Ruth Gregory, U.K. economist at Capital Economics.

Capital Economics expects the U.K economy grew 0.5% in the quarter, while the consensus estimate from FactSet is for a 0.4% rise in GDP. Either would be a deceleration from the 0.7% official reading for the previous quarter, and the slowest pace since 0.2% in the first quarter of 2016.

The first-quarter GDP report is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time Friday. Growth year-over-year is estimated to come in at 2.2%.

Prices have come under pressure since the pound GBPUSD, +0.2802% fell sharply after the June referendum, in which voters backed the withdrawal of the U.K. from the European Union. Sterling has recovered from its lowest levels, but it’s still down roughly 15% against the greenback, given it was at about $1.50 just before the vote.

via MarketWatch

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