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Invesco experts comment on today’s GDP figures

Commenting on today’s ONS announcement about the latest UK GDP statistics, including Q4 2020 rising 1.3%:

Georgina Taylor is multi-asset fund manager at Invesco 

“The UK GDP data surprised marginally to the upside however this data release is lagging the more timely monthly data which reflects a drag on growth as the lockdown has continued in Q1.

“Two points were noteworthy – an increase in household savings which reflects the household response to the lockdown, and a widening of the current account deficit which suggests some hoarding of imported goods in Q4 ahead of Brexit.

“Going forward, the speed of the vaccine rollout continues to support economic prospects with a roadmap that should see an improvement in data in Q2 and beyond.

“While we can’t ignore that the UK economy remains below its pre-pandemic peak, this improvement in economic prospects could be reflected in increasing support for UK assets which have lagged their global counterparts in recent years.

“Longer term issues surrounding the increase in government debt which has been necessary to support the economy and ongoing issues related to Brexit could see volatility returning to markets further down the road.”

Michael Matthews is fixed-income fund manager at Invesco:

“This morning’s final return of fourth quarter UK GDP came in at 1.3% qoq, above the previous estimate of +1.0%.  This upward revision is interesting given the restrictions to movement and activity during the period.

“We think that whilst there are still clear structural headwinds for the UK economy, the near term cyclical outlook is very strong.  Covid restrictions are being eased, fiscal and monetary policy is highly supportive, credit growth is robust and the build-up of excess savings leaves scope for additional spending.  The Bank of England is forecasting a strong recovery, with a 5% GDP growth estimate for 2021 and as a result, we think that pressure will remain on UK gilt prices.”

 

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