CBI UK Growth Forecast Revised Downwards
The Confederation of British Industry (CBI) had knocked -0.3% off each of the forecasts made last November regarding GDP growth in the UK during 2016 and 2017. Britain’s leading organisation for employers now predicts growth of 2.3% this year, slowing to 2.1% next year. The Office for Budget Responsibility (OBR) is currently in the process of revising its forecasts made from the Autumn Statement, which predicted 2.4% growth in 2016 and 2.5% growth in 2017. Considering the developments which have happened since, it is highly likely that the new forecasts will be lower.
Yesterday…
UK GDP Forecast Disappoints; Manufacturing and Trade Drag on Growth
The National Institute for Economic and Social Research (NIESR) predicts January GDP will be just 0.4%, a -0.1% drop on the final quarter of 2015. According to the institute, the slowdown is mostly due to a combination of poor production data from the industrial and manufacturing sectors and the widening trade deficit, which hit a record -£125 billion last year.
Earlier…
Pound Sterling is bullish against the Euro (GBP/EUR) and the US Dollar (GBP/USD) today despite weak industrial data. According to the latest figures, the recovery shown by the UK’s industrial sector over 2013 and 2014 abruptly halted in 2015. Meanwhile, the Euro is weakening after stocks have firmed again and the US Dollar remains soft ahead of Janet Yellen’s appearance before the House Financial Services Committee.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Surges Regardless of Faltering Industry
The UK economy continues to remain significantly unbalanced after today’s figures showed the manufacturing and industrial sectors are still languishing far below their pre-financial crash levels of growth. Industrial Production fell -1.1% month-on-month (MoM) and -0.4% year-on-year (YoY) in December, while Manufacturing Production slipped -0.2% MoM and -1.7% YoY.
Manufacturing accounts for 10% of UK GDP and thanks to the latest figures the sector is currently -6.5% below the level it was operating at before the 2008 financial crisis. The industrial sector is nearly 10% below its 2008 level. According to the Office for National Statistics, the energy supply sector saw a -5.4% monthly drop in December, while mining and quarrying fell -4%.
Despite the disappointing news, the Pound Sterling to Euro (GBP/EUR) exchange rate is currently bullish as the common currency is weakened following yesterday’s stock rout. The single currency had shot upwards, with analysts believing the surge to have been caused by Eurozone banks ditching their foreign assets in order to balance their portfolios with low-risk Euros. With the markets calming, appetite for stocks has increased and so the Euro is falling once more.
The only data due out for the UK is the RICS House Price Balance, while there is no Eurozone data until Friday, which sees the release of German and Italian GDP data and the key Eurozone GDP figures.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Strong Ahead of Fed Chair Appearance
According to a testament by Janet Yellen, released ahead of today’s appearance before the House Financial Services Committee, the Federal Reserve Chair is likely to remain upbeat about the US economy, although she will highlight a few new areas of concern that could threaten growth. The US Dollar has remained weak over the past few days as investors await her comments, hoping for some clue as to what will happen to US interest rates at the March meeting. The current speculation ranges from a cut into negative territory to another rise.
In her prepared remarks, Yellen has said, ‘Financial conditions in the United States have recently become less supportive of growth. These developments, if they prove persistent, could weigh on the outlook for economic activity and the labour market.’
Current GBP, EUR, USD Conversion Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading around 1.2895, while the Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7753.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading around 1.4486, while the US Dollar to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.6902.
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