UK economic data released today from the Office for National Statistics shows that the economy grew faster in the 3rd Quarter than was originally thought. Strong services and construction output caused a 0.6% increase in GDP on the quarter – a revised figure from the initial 0.5%. However, the Office for National Statistics revised 2nd quarter growth from 0.1% to a stagnated 0.0% rate of change.
The household saving ratio rose to 6.6% in Q3, the highest for over a year, suggesting that caution is in the air among British families. Household finances have been constricted by weak wage growth and soaring inflation, which has wreaked havoc in the retail sector.
Bank officials predict a sharp fall in inflation next year and this will leave households and general citizens with more spare cash to pump back into the economy. Growth outlook on the whole remains bearish though, with further Quantitative Easing widely forecast to be announced in February.
Consumer confidence is at its lowest level in almost 3 years, but the government is reluctant to reduce their deficit reduction plan. Moody’s credit rating agency announced this week that they have put Britain on credit downgrade watch; the UK’s top AAA rating would not survive if spending cuts were reduced.
The US Dollar along with the Japanese Yen were largely funded yesterday following an initial dip; markets reacted to the ECB 1% interest loans with optimism and the Euro made some gains, but these were quickly corrected as it became apparent that Eurozone banks were using the loans to balance their own books and trigger new revenues rather than pledging the cash to sovereign debt and bond auctions.
Gold, oil, equities and commodity-correlated currencies fell as investors flew to the safe haven Dollar and Yen. The Pound is currently trading at 1.569 against the Dollar keeping in line with earlier gains this week.
Comments are closed.