Synopsis:

Both Barclays and Morgan Stanley forecast Q3 UK GDP growth at 0.2% quarter-over-quarter, down from 0.5% in Q2. Barclays anticipates a small positive impact from services, industrial production, and construction in the September GDP print, with flat private domestic demand. Morgan Stanley sees limited domestic demand growth but a positive contribution from net trade due to normalized imports.

Key Points:

• September Monthly GDP Forecast (Barclays): Barclays expects a 0.2% month-over-month increase, supported by a 0.1% gain in services and slight growth in industrial production (IP) and construction.

• Q3 GDP Composition (Barclays): Private consumption is expected to rise modestly at 0.2% quarter-over-quarter, while investment remains flat, aligning with the BoE’s forecast from November.

• Q3 GDP Drivers (Morgan Stanley): Morgan Stanley anticipates a balanced contribution, with flat domestic demand, a boost from net trade as imports normalize, and a drag from inventories.

Conclusion:

Both Barclays and Morgan Stanley project UK Q3 GDP growth of 0.2%, with limited contributions from domestic demand but support from trade normalization. This aligns with recent BoE forecasts and reflects a slowing economic backdrop, with external factors providing a modest offset to stagnant domestic activity.