News & Analysis

This morning’s UK GDP release saw the economy contract by 2.6% in November as the government imposed a four-week national lockdown on November 4th, with other devolved governments tightening measures at the margin also.

With October’s GDP revised up from 0.4% to 0.6%, this saw the three-month rolling growth rate sit at 4.1%, up from the 3.3% expected but a sharp decline from the 10.2% recorded in October. This isn’t all due to the November contraction, but also the natural slowdown in the recovery as the immediate rebound due to loosening measures over the summer months is now out of scope.

Due to the lagged nature of the data release and the fluid situation the economy currently finds itself, FX markets took little notice of today’s GDP release.

However, the print itself may be more telling than not. With November’s GDP contraction sitting a full 2 percentage points higher than expectations (2.6% vs -4.6% expected), the UK economy is seemingly faring better under subsequent lockdown measures as businesses adapt to what is becoming the new norm. The Service industry remains the most affected, naturally due to the circumstances of the lockdown measures, however, there is an argument for how much further the industry can contract as activity grinds to the bare minimum. There will be a mild rebound in services activity in December due to the brief reopening of the economy, but this will be short-lived.

With the UK economy subject to tougher restrictions again as national lockdowns were announced, November’s data could give a brief flashpoint as to the level of economic impact the current measures are inflicting.

While lockdown measures are tighter across the board now compared to back in November, notably due to school closures and tougher measures in Scotland and Wales, the greater level of business resilience bodes well for subsequent GDP readings.


Sterling unfazed by the GDP release as traders focus on more timely data measures for UK economic activity


ONS data see the service sector take most of the hit in November as construction sits close to January’s level


Author: Simon Harvey, Senior FX Market Analyst



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