Is UK GDP set to confirm continued economic growth in Q3?

• Will UK GDP point to faster economic growth in Q3? 
• Strong manufacturing activity is expected to drive a further acceleration in Gross Domestic Product over the three months to September.
• With the near-term uptrend in Pound Sterling against the US Dollar intact, bulls are targeting the 1.3500 area.

Markets are positioning for stronger UK growth ahead of Thursday’s preliminary third-quarter Gross Domestic Product (GDP) estimate, the main event on the United Kingdom’s (UK) economic calendar this week. The Office for National Statistics will publish the figures, with growth forecast at 0.7% for the three months to September, up from 0.5% in the second quarter of 2026. The annual growth rate is expected to pick up to 1.9% from 1.4% in the previous month.

Industrial Production is expected to be a key contributor to the UK’s economic expansion, with annual growth forecast to strengthen to 3% in September from 1.6% in August. Confirmation of this strength would create a favourable backdrop for the Bank of England (BoE) to continue the monetary tightening cycle it began last week.

UK GDP outlook: What could the figures reveal?

Expectations for third-quarter economic growth have improved as recent UK macroeconomic releases have proved surprisingly resilient to uncertainty surrounding the Middle East war and higher oil prices.

Released last month, August’s monthly GDP figures exceeded forecasts, showing economic growth of  0.1% rather than the 0.1% contraction markets had anticipated. Manufacturing strength underpinned the expansion: factory output rose 0.8% in August, largely counterbalancing stagnation in services and a 0.2% fall in construction output.

Further evidence of resilience came from the UK Manufacturing and Services Purchasing Managers’ Index (PMI) readings, which indicated continued growth in business activity in October. Meanwhile, unemployment fell to its lowest rate since July last year. This broadly healthy macroeconomic backdrop has led the International Monetary Fund to upgrade its UK growth forecast for 2026 to 1.3%, against 1% previously.

A neutral UK budget has also supported the favourable economic backdrop and the British Pound, easing concerns over the sizeable public debt, at least for the time being. Higher taxes on banks and gambling companies are expected to fund lower charges on food and energy bills. The bond markets, whose reaction had been feared, have so far raised no significant objection to these proposals.

Against this backdrop, last week’s Bank of England rate increase gives the third-quarter GDP release particular significance. While economic growth is not an explicit objective of the BoE’s mandate, a healthy GDP reading would undoubtedly simplify its rate-setting decisions in the face of persistently high consumer inflation.

The BoE delivered its first monetary tightening in three years last week, and some policymakers, including Governor Bailey, indicated that further rate increases might be required to return inflation to target. On Tuesday, Deputy Governor Clare Lombardelli took a stronger position, stating that she “would not rule out rate hike possibility in December”. A robust GDP figure on Thursday would lend support to those views and could encourage speculative buying of the Pound.

When is the UK’s Q2 Gross Domestic Product release, and what could it mean for GBP/USD?

Upside risks dominate the outlook for GBP/USD ahead of the UK’s preliminary Q2 GDP estimate, due on Thursday at 07:00 GMT, as mentioned earlier. The figures are forecast to indicate moderate expansion in the three months to June. A stronger-than-anticipated result would increase the likelihood of another BoE rate rise, most likely in February.

After Tuesday’s sharp reversal, GBP/USD is trading near 1.3320 at the time of writing. Robust US inflation figures and hawkish remarks from Fed speakers drove broad-based US Dollar gains. Selling pressure has taken the pair below the lower boundary of the ascending channel dating from October. On the 4-hour chart, momentum signals have shifted into bearish territory: the Relative Strength Index (14) is nearing oversold levels, while the Moving Average Convergence Divergence (MACD) histogram displays expanding red bars. 

Guillermo Alcalá, FX Analyst at FXStreet, assesses the outlook as follows: “Recent GBP/USD price action suggests that the corrective recovery from mid-October lows might have come to an end, and that the pair is ready to resume the broader bearish trend.”

Alcalá outlines the downside scenario: “While below the channel bottom and the November 6 low, near 1.3340, bears are likely to be tempted to revisit the late October lows near 1.3270, with their gaze on the key resistance area near 1.3130,”

For an upside recovery, Alcalá sets out the requirement: “The pair would need to return above the broken trendline support, now around 1.3380, to ease bearish pressure, and shift the focus back towards the November 10 high near 1.3460 and the November peak, in the 1.3500 area.”