Economy struggling to pick up much pace in Q3

The economy looks unlikely to post a significant pick-up in growth in the third quarter. Indeed, the average level of the Markit/CIPS all-sector PMI in July and August is consistent, on the basis of past form, with quarterly GDP growth of around 0.4%. Note too that the surveys have overstated growth in recent quarters. Nonetheless, there are some reasons to be optimistic that some re-acceleration is in prospect. After all, the economy appears to have gathered momentum over the course of Q2, setting a good base headed into Q3. Moreover, the underperformance of the official data relative to the surveys in Q2 was largely due to the industrial sector, which looks poised to post a rebound in Q3. There have also been some encouraging signs that business investment and trade should pick up over the coming months, helping to offset the slowdown in consumer spending growth. As a result, we remain optimistic that the economy will put in a somewhat stronger performance in the second half of 2017 compared to the first.