DAVY VIEW

The UK economy was stronger than expected in March, and after some downward revision to February’s result, Q1 growth was in line with consensus. This resilience is encouraging despite war in the Middle East impacting March activity, although it also partly reflects a recovery from weaker activity in Q4 last year, when Budget concerns were a factor. Looking ahead, the UK’s fragile fiscal position is likely to continue to weaken H2 activity; in any case, UK economic growth remains below its potential. We therefore still expect the next change to Bank Rate will be a cut.