The long awaited first stab at UK gross domestic product (GDP) over Q1 2008 was released on Friday. Much has been written regarding the continuing crisis in the credit markets and the plight of the US economy, however, recent survey data indicates that whatever the problems in store for the UK over the next twelve months, so far activity appears to be holding up fairly well.

We take the view that inflation is a lagging indicator and deflationary pressure, the consequence of deflating asset prices, is the more pernicious issue for the future.