Fitch warns Osborne lacks flexibility; trade gap hits UK growth - live updates

Discussion in 'Market News' started by Lily, Nov 27, 2015.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Rolling coverage of the day’s economic and financial events, including a new health check on the UK economy

    1.18pm GMT

    Rating agency Fitch has joined the chorus of experts warning that UK chancellor George Osborne is limited room for manoeuvre if the economy under-performs.

    Debt reduction is increasingly being driven by underlying growth and revenue trends, which could reverse (for example, if growth slows or revenue forecasts are revised back down).

    Using better-than-expected revenue forecasts to scale back previously announced expenditure cuts suggests that this may pose downside risks to fiscal targets.

    Related: If Osborne misses his new target, there really is nothing left to cut

    12.19pm GMT

    Today’s GDP growth report also highlights how UK manufacturing has been struggling over the last year, contributing to the trade gap:

    11.50am GMT

    The end of the cost-of-living squeeze is also driving UK growth, argues Sam Hill, senior UK economist at RBC Capital Markets.

    He points to the recent drop in inflation (to minus 0.1%), which means real wages are up around 3%.

    The domestic private consumer is proving resilient and accounting for a good deal of the core underlying real terms growth in the UK economy.

    A real-terms income boost as the result of falling prices on a number of items of essential household spending is likely to have been an important driver of this.

    11.43am GMT

    Britain’s trade deficit really is quite shocking -- credit rating agency Standard & Poor recently declared the UK has the worst external liquidity metric of any of the 129 countries it rates.

    On the subject of the UK net trade drag on GDP - UK's external deficits with the world are ranked as the world's worst, 129th of 129 by S&P.

    11.20am GMT

    Back to the UK... and today’s GDP report shows that the economy is only slightly larger than before the financial crisis began, once you adjust for population changes.

    11.04am GMT

    We also have disappointing growth figures from Greece.

    Well, when I say growth... its economy actually contracted by 0.9% in the third quarter of 2015, according to stats body Elstat.

    Greek #GDP contracts at faster pace than previously estimated: Recent figures show that the economy shrank 0.9% q/q (prev. -0.5%)

    10.47am GMT

    Kallum Pickering, economist at German bank Berenberg, predicts that UK growth will accelerate to 0.6% in the current quarter.

    He believes the domestic economy is strong enough to ride out problems overseas:

    Today’s GDP and services data reflect an economy driven by domestic demand that is resilient to foreign risks. The idea that the UK economy would be affected in light of accumulating foreign risks through more channels than trade is just that, an idea.

    Domestic momentum was maintained through the third quarter and going forward we expect it to remain resilient with GDP growth accelerating to 0.6% qoq in Q4 2015 and maintain this pace over the medium-term.

    10.32am GMT

    Britain’s manufacturing body, the EEF, fears that Britain’s trade gap will not be closed anytime soon:

    EEF chief economist, Ms Lee Hopley, says:

    “No surprises in the second estimate as the economy was ticking over, including a chunky contribution from business investment, which has had an unbroken run of expansion for a year. Pulling sharply in the opposite direction is the contribution from net trade, with modest export growth being swamped by a massive bounce in imports.

    “This looks like the pattern of growth we can expect over the next few years, with spending by households and capital investment remaining the key economic players. This will rely on businesses maintaining a strong appetite for continuing to expand, even in the face of some challenging external conditions.”

    10.25am GMT

    These figures show that talk about rebalancing the UK economy is “completely misplaced”.

    So says Jeremy Cook, chief economist at the international payments company, World First:

    “The latest growth figures from the UK economy have told us a very familiar story; private consumption and government spending are making up for a very poor trade outlook.

    UK consumers have been ably helped this year by low interest rates, heightened disposable income courtesy of stagnant inflation and rising wages, and a strong pound.

    10.16am GMT

    Trade is the only part of the UK economy that didn’t provide some growth in the last quarter.

    While trade wiped off 1.5 percentage points, Gross capital formation (basically investment in new machinery etc) was the best performing area, contributing 1.2 percentage points to GDP.

    UK Q3 #GDP confirmed at +0.5%: Drag on growth comes from trade, which contributed negative 1.5 percentage points (heaviest drag on record)

    10.06am GMT

    Britain’s trade balance deficit almost doubled in the last quarter.

    It widened from £7.7bn in April-June to £14.2bn in July-September.,

    9.59am GMT

    These charts show how net trade (exports minus imports) had such a negative effect on growth in the last quarter:

    9.51am GMT

    Britain’s trade gap dragged the economy back in the last quarter, worse than any time in at least the last 18 years.

    Today’s GDP figures show that net trade wiped 1.5 percentage points off UK GDP.

    UK Balance of Payments Deficit widens yet further

    9.47am GMT

    Services is the only part of the economy that’s bigger than its pre-crisis level:

    UK GDP +6.4% compared with 6.4% above 2008 Q1 peak: Services +11.1% Construction +4.4% Industrial Production +9.3%

    9.39am GMT

    Britain’s manufacturing sector shrank by 0.4% in the last quarter, showing the factory output weakened over the summer.

    9.35am GMT

    The service sector continues to drive the UK economy.

    The Office for National Statistics says that services expanded by 0.7% during the last quarter.

    9.30am GMT

    Here we go...

    The UK economy grew by 0.5% in the third quarter of 2015.

    9.25am GMT

    All hands on deck! UK #GDP revision is due at 9:30 am #GBP

    9.06am GMT

    Unless something seriously odd has happened, today’s GDP figures should confirm that Britain’s economy has now expanded for 11 quarters in a row:

    8.56am GMT

    It isn’t even December yet, and the Bank of England has wheeled out the Christmas decorations:

    Christmas has arrived at Threadneedle Street .... @bankofengland ☺️

    8.42am GMT

    Across Fleet Street, reporters are returning to their desks after an extra-early start to watch Black Friday unfold.

    This year, though, Britain’s consumers have taken a relaxed approach to the bargain bonanza. No repeats of last year’s pushing’n’shoving.

    Pandemonium in M&S

    Mad stampede of Black Friday shoppers leaving Tesco this morning

    Related: Mince pies not mini-riots - cautious UK shops open for Black Friday

    So let me get this straight: UK has imported Black Friday from the US, but not Thanksgiving? One doesn't seem to make sense w/out the other

    Best quote of Black Friday so far from one disgruntled Tesco shopper: "I just wanted to buy a sandwich, but they won't let me until 7am"

    8.36am GMT

    FXTM Research Analyst Lukman Otunuga reckons the pound could be hit by today’s UK GDP figures (due in an hour’s time).

    The lingering impact of Mark Carney’s inability to provide a concise timeframe on a UK rate rise has punished the Sterling this week. This single currency continues to face headwinds from the Bank of England’s clear reluctance to raise UK interest rates and this has encouraged sellers to depreciate the pound further.

    Even though economic data from the UK has picked up in November, the non-existent rise in inflation has contributed to UK interest rate expectations being pushed back further. If the second estimate of the UK’s Q3 GDP points towards slowing economic growth, there is going to be further potential for the Pound to face losses.

    8.32am GMT

    It’s more of a Red Friday than a Black Friday in the City, where shares are falling in early trading.

    The FTSE 100 is down 30 points or 0.5% at 6362. Other European markets are also dropping, after a big selloff in China.

    8.21am GMT

    We shouldn’t read *too* much into one month’s data, but it appears that UK house price growth stalled last month.

    “Surveyors have continued to report a dearth of properties on the market in recent months, with the number of available homes reportedly at the lowest level since the late 1970s.

    Therefore it is positive that policymakers are focusing on the need to increase home building, with the Chancellor announcing a range of measures aimed at boosting housing supply in his Autumn Statement.

    8.10am GMT

    Aïe. French GDP at risk of slowing down quite sharply in Q4.

    8.09am GMT

    Ouch. French consumers kept their hands in their pockets last month, suggesting the country’s economy may been slowing down this autumn.

    Consumer spending fell by 0.7% during the month, with car sales dropping particularly sharply.

    French consumer spending (-0.7% MoM in Oct) dragged down by durable goods (-1.8%) including autos (-3.4%).

    French consumer spending down 0.7% in October; poses risk to Insee's Q4 GDP growth forecast of +0.4%

    8.02am GMT

    Today’s growth figures could highlight how Britain find itself between a strengthening US economy, and a weaker European one.

    That tussle is hitting sterling - which is close to a seven-month low against the US dollar (at $1.509), and a near eight-year highs against the euro (€1.42).

    Either way you swing it, the UK is caught in the middle of the extreme policy divergence between the US and Europe.

    With Europe the biggest export destination for British businesses, you can understand Governor Mark Carney erring towards trying to combat sterling’s strength versus the euro when he said rates are to remain low “for some time.”

    6.12am GMT

    Good morning.

    Is Britain’s economy really as rosy as Wednesday’s autumn statement implied?

    Related: Black Friday 2015: the best deals and latest news - live

    Continue reading...

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