Last week’s third estimate for Q4 2009 GDP revealed another upward revision from 0.3% to 0.4% quarterly output growth. The second upward revision leaves the UK’s exit from recession in Q4 looking more respectable. The CIPS/Markit business survey for the UK manufacturing picked up again in March, rising from 56.6 to 57.2 - its highest level of manufacturing output growth since 1994. The survey results will raise hopes that the UK economic recovery will accelerate further into Q1 2010, weather permitting.
The Nationwide house price index resumed its upward trend in March, rising 0.7% in the month and mostly reversing the surprise 0.8% fall seen in February. UK house prices are now 9.0% higher than a year ago, according to the Nationwide measure.
In spite of a strong batch of data on the UK economy, Gilt yields drifted lower across much of the curve last week, with market dynamics favouring the rise in Gilt prices as there was no new Gilt supply in the week. Yields have already reversed much of that move this morning, as the Gilt market adjusted to the sell off in US Government Bonds on the back of strong US jobs data reported over the Easter break. Gilt yields and swap rates are up 6-8bps across the curve this morning.
This week brings a busy week of economic data and events in the UK. The closely watched CIPS/Markit March business survey results for the key UK services sector is reported today. The MPC meet on Thursday where another no change vote is widely anticipated, with the MPC continuing to take a ‘wait-and-see’ stance. Thursday also brings February industrial production data, and Halifax house price data for March is expected during the week.