According to the Office for National Statistics,
- Services sector output rose by 0.8% quarter-on-quarter, up from a preliminary 0.7%. Output across the services sector increased for the first time since Q1 2023.
- Household consumption rose by 0.4%, up from a preliminary increase of 0.2%.
- Production increased by 0.6%, down from a preliminary 0.8%. Manufacturing production was the largest contributor.
- The construction sector contracted by 0.6%, an improvement from a preliminary contraction of 0.9%.
- Real households’ disposable income increased by 0.7%, unchanged from Q4 2023.
- However, the household saving ratio increased from 10.2% (Q4 2023) to 11.1% (Q1 2024).
The UK economy had contracted in the previous two quarters and stalled in April 2024.
Bank of England Monetary Policy Implications
The Bank of England maintained interest rates at 5.25% on Thursday (June 20) in a 7-2 vote.
Concerns about inflation left the BoE in a holding pattern. Wage growth and services inflation trends influenced the BoE rate path. The finalized GDP Report highlighted the effects of the services sector on the UK economy and inflation. However, a higher savings rate and steady disposable income could give the BoE hope for a softer inflation outlook.
GBP/USD Reaction to the Finalized UK Q4 GDP Report
Before the UK GDP Report, the GBP/USD climbed to a high of $1.26467 before falling to a low of $1.26216.
However, in response to the Report, the GBP/USD fell to a low of $1.26302 before rising to a high of $1.26355.