GDP growth slowed in the second quarter, but the British pound managed to rally. The pace of growth has fallen from an annualized rate of 2.3 to 1.6 percent, the lowest level since the first quarter of 2002 and equaling the 15 year low.
Weak consumer spending has been the primary drag on the UK economy and given the recent trend of growth, the country could be headed for a recession which is defined by 2 quarters of negative GDP growth. The pace of deterioration in the UK economy has picked up towards the end of the second quarter which implies that unless there is a serious turnaround in the UK economy, the country could be headed for a contraction in the third quarter. We are bearish British pounds and expect the currency to underperform many of the major currencies. Aside from manufacturing PMI and some housing market data, the UK economic calendar is relatively light next week.