The first monthly GDP reading showed a pick-up in growth in the three months ending May (+0.2% 3m/3m) vs flat growth in the three months to April. The services sector experienced growth of +0.4% in the three months to May. Growth in consumer-related industries (e.g. retail, hotels, restaurants) picked up, particularly thanks to the warm weather and the royal wedding. However, manufacturing declined by -1.2% 3m/3m, mainly driven by weak exports. Overall, this release is in line with our expectation for a modest pick-up in GDP growth to +0.3% / +0.4% q/q in Q2 from +0.2% q/q in Q1.

The UK government will publish a detailed White Paper by the end of this week on the future targeted FTA with the EU. First hints suggest a softer Brexit than initially announced: zero tariffs for manufactur¬ing and agricultural goods, but not services – which is rather similar to the FTA EU- Switzerland. How¬ever, downside risks to such a softer Brexit have emerged promptly as key ministers have resigned this week owing to disagreement with PM May’s course. A confidence vote against PM May doesn’t seem feasible at this stage but a contest for leadership at the Conservative autumn party conference (30 Sept. to 3 Oct. 2018) cannot be ruled out which could increase the likelihood of early elections in 2019.