DAVY VIEW

This morning’s GDP data for the UK paint a similar picture to the prior year, with growth in the first half considerably stronger than in the second half of the year. The Q4 result was softer than expected, on downward revisions to November’s strong increase. The bigger picture, however, is that a broad-based weakening took place in Q4, especially in terms of household spending and business investment. Though Budget worries were undoubtedly a factor, recent UK disinflation looks likely to be driven by a weaker growth dynamic, so we expect more cuts to Bank Rate this year.