UK industrial production and Euro area Q2 GDP in focus this week – RBC CM

Research Team at RBC Capital Markets, suggests that the UK June industrial production data have the potential to lead to a revision in the initial estimate of Q2 GDP, but it would have to be a large deviation from the 0.2% m/m provisional number used by the ONS in the GDP report.

Key Quotes

“As such, it is likely that June’s IP release will come and go without much excitement. It is also the case that a number at or around 0.2% m/m will help to reinforce the view that April’s very strong 2% m/m gain was a one-off, which helped to mask a pre-referendum trend to weaker activity levels in the economy.

Euro area Q2 GDP (second estimate) (Fri): The second estimate of euro area Q2 GDP provides a breakdown of growth by country although further detail beyond that is limited until the final estimate early next month. In advance of the aggregate release, the German and

Italian Q2 growth figures become available. We expect that the German economy slowed significantly in Q2 (to 0.2% q/q from Q1’s 0.7% q/q). Retail sales were negative in Q2 q/q, pointing to a slowdown in household spending, which we see as the main culprit behind the lower growth outturn. However, employment and wage growth should continue to support disposable income growth in Germany in the second half of the year and, with sentiment indicators showing resilience post-Brexit (e.g., the GfK consumer confidence index has shown little change in the wake of the vote), the conditions for domestic demand to continue supporting growth in the second half of the year remain in place.”