Good news on GDP growth but rate cuts are still on the cards

The pound shrugged off unexpectedly good economic growth figures today and fell against the euro and the dollar as traders said the past was no predictor of the UK’s future after Brexit.

Gross domestic product rose 0.6% in the second quarter, up from 0.4% in the first, and above the average 0.5% predicted by economists. But, with the reading from April to June covering just a single week after the referendum, analysts said the economy could still slow sharply or even go into decline.

Samuel Tombs of Pantheon Macroeconomics said: “The second quarter’s GDP figure is not as robust as it seems at face value and it won’t hold back the Bank of England from cutting interest rates next week.”

GDP growth was driven by the service sector, particularly retail, said the ONS, but that was the sector which last week’s flash PMIs showed suffering the most immediately after the vote.

However, ONS chief economist Joe Grice said: “Any uncertainties in the run-up to the referendum seem to have had a limited effect. Very few respondents to ONS surveys cited such uncertainties as negatively impacting their businesses.”

The pound dipped a third of a cent against the euro and dollar.