DAVY VIEW

This morning's data showing that UK GDP contracted by 0.5% in July reverses the sharp 0.5% gain in June. Overall, the UK economy has effectively flatlined over the past three months. However, August's composite PMI at 48.6 suggests private sector output is now contracting. This morning's data will therefore still fuel fears that the impact of higher interest rates is now being felt, with a risk of recession in H2 2023.