The Monday Note - 16 July 2018

• The FTSE 100 closed on Friday at 7,661.9, down 26 points on a week earlier, after a rollercoaster week for the index as investors reacted to political news. The ten year Gilt yield stood at 1.27%. 
• UK GDP expanded by 0.2% in the three months to May 2018. This marks a rebound on the zero growth figure recorded for the three months to April. 
• China’s GDP increased by 6.7% in the year to Q2 2018, as debt availability and factory output slowed. The figure marked a slowdown on Q1, but was also in line with forecasts. 
• According to the Daily Telegraph, Goldman Sachs is to occupy nearly all the space in the 1.1 million sq ft headquarters building they have under construction in London, despite plans to move 500 roles to the EU. 

Chief Economist comments: 

The GDP figures showed the UK economy gained momentum in May, and survey evidence suggests June also saw robust growth. This all increases the likelihood of an August base rate hike.

There has been ample warning that an increase is coming, so many borrowers have probably fixed rates in anticipation. The experience from the US has been that the economy has taken small rate increases in its stride.

With pay growth having overtaken inflation this year, and businesses trading through the Brexit uncertainty, the same will be true in the UK.