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New figures show UK economy a little larger than thought

Britain’s economy is slightly larger than previously thought, according to new official estimates published on Tuesday that take into account new methodology and data.

The Office for National Statistics added around 26 billion pounds to the size of the world’s fifth-biggest economy in 2016, a rise equivalent to around 1.3% of gross domestic product and bringing total output to just under 2 trillion pounds.

The ONS regularly updates its methods for measuring the economy, which usually results in slight increases to its size.

The latest estimates used new surveys on costs faced by businesses and “significant” changes to the way capital assets such as buildings and machinery are measured.

Average annual growth in the economy between 1997 to 2016 is now estimated at 2.1%, up from 2.0% previously.

“These new figures are produced using new sources and methods, giving significantly improved estimates of how money moves around the UK economy,” Rob Kent-Smith, head of GDP at the ONS, said.

“While these figures are calculated using more and better information than was previously available, overall, they paint a very similar picture about the size and growth in the economy to our current estimates.”

The new figures showed the economy contracted by 6.0% during the financial crisis, a smaller drop than the 6.3% estimated previously. The economy also returned to its pre-crisis peak in early 2013, slightly sooner than thought beforehand.

Reporting by Andy Bruce; Editing by William Schomberg

Source: UK Reuters

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UK borrowing grows as new PM prepares to take over

Britain’s budget deficit swelled in the first three months of the tax year, official data showed, putting the public finances on a shakier footing even before a new prime minister moves into Downing Street next week clutching costly spending pledges.

Boris Johnson — the front-runner to succeed Theresa May — and rival Jeremy Hunt have both made pledges of tax cuts and higher spending which independent analysts say will cost tens of billions of pounds.

Britain will suffer a similar fiscal hit if it leaves the European Union without a transition deal on Oct. 31, something neither candidate has ruled out.

The government’s budget forecasters on Thursday put the cost of a no-deal Brexit to the public finances at about 30 billion pounds a year.

On Friday, the Office for National Statistics said public borrowing in June was the highest in four years for that month at 7.2 billion pounds — above all forecasts in a Reuters poll of economists and up from 3.3 billion pounds a year earlier.

“Disappointing news on the public finances to greet the new prime minister and chancellor,” Howard Archer, economist at consultants EY ITEM Club, said in an email to clients.

In the three months to June, borrowing was a third higher than in the same period in 2018 at 17.9 billion pounds.

June’s extra borrowing was driven by increased interest costs for inflation-linked government debt and higher spending on public services, compounded by stagnating tax revenues.

Corporation tax receipts — a small part of overall revenue — showed the biggest year-on-year fall since 2013, though payroll taxes continued to rise solidly.

Samuel Tombs, an economist with Pantheon Macroeconomics, said the figures were a tentative sign that the economy was flagging, but the higher debt costs were probably a one-off linked to the timing of Easter which pushed up inflation in April this year, affecting payments in June.

While data early in the financial year does not always offer a good guide to full-year performance, Friday’s figures showed public spending was running ahead of forecast.

In March, Britain’s Office for Budget Responsibility predicted public borrowing would rise to 1.3% of GDP or 29.3 billion pounds in 2019/20 from a 17-year low of 1.1% in 2018/19.

FISCAL DISCIPLINE LOOSENING
On Thursday, the OBR described Johnson’s and Hunt’s campaign pledges of tax cuts and increased spending as “expensive” and said commitment to fiscal discipline was slipping after years of public spending restraint.

Johnson has called for big tax cuts for high earners, reduced payroll taxes and more spending on schools and police. Hunt has promised a large cut in the rate of corporation tax.

“The imminent change of Conservative leader … looks highly likely to result in a significant change of tack on fiscal policy,” EY’s Archer said.

Neither candidate has endorsed finance minister Philip Hammond’s budget goals of keeping the budget deficit below 2% of GDP and lowering public debt as a share of GDP.

Friday’s figures showed public sector net debt totalled 83.1% of GDP in June, excluding public-sector banks, or 74.8% once the effect of a temporary Bank of England lending scheme was stripped out too.

Britain’s debt-to-GDP ratio was below 40% before the 2008/09 financial crisis.

Editing by Catherine Evans

Source: UK Reuters

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Brexit stockpiling helps UK economy grow 1.8 per cent in early 2019

Brexit stockpiling gave a 1.8 per cent boost to the UK economy in the first quarter of 2019 compared to the same quarter last year, figures confirmed today.

UK GDP rose 1.8 per cent in January to March compared to its corresponding 2018 quarter.

That figure beat the 1.4 per cent quarterly growth between October and December last year, the Office for National Statistics (ONS) said.

The economy grew 0.5 per cent on a quarterly basis, unchanged from the ONS’s initial estimate.

The services sector offered the biggest economic boost, followed by production, thanks to a 1.9 per cent rise in UK manufacturing output.

Brexit stockpiling underpins UK economy

Brexit stockpiling underlined the growth in UK manufacturing ahead of the UK’s potential no-deal Brexit departure on 29 March, the original deadline for leaving the EU.

In fact, stockpiling added 0.9 percentage points to the first quarter growth rate of 0.5 per cent.

Howard Archer, chief economic adviser to the EY Item Club, said: “There was a major boost to first-quarter GDP growth from stockpiling as businesses and, very possibly to a limited extent, consumers looked to protect their supplies in case a disruptive no-deal Brexit occurred at the end of March.

“Additionally, unseasonably warm weather gave a boost to consumer spending in the first quarter.”

Business investment finally grows

Business investment rose 0.4 per cent quarter-on-quarter after dropping in every quarter last year.

Archer called it “welcome news” but added that he was “sceptical” that this was the start of an upturn in spending.

The economist pointed to “ongoing major Brexit, UK domestic political and global economic uncertainties”.

Business investment was still 1.5 per cent lower than it was in the same quarter a year ago.

No-deal Brexit could weaken GDP growth

Tory leadership contest frontrunner Boris Johnson is set to take the UK out of the EU in a no-deal Brexit on 31 October if a deal cannot be reached.

And in the week that Bank of England governor Mark Carney warned market fears of a no-deal Brexit have risen, economists warned of the possible fallout for the UK.

Archer said: “Under a no deal scenario, we suspect that GDP growth is likely to come in at just 0.3 per cent in 2020, with the economy likely suffering stagnation or even mild recession over the first half. Growth is seen picking up to 1.2 per cent in 2021.”

Meanwhile a delay to Brexit would extend uncertainty, sending GDP growth in 2020 to around 1.3 per cent, he predicted.

“Much would depend on how long the delay to the UK’s departure was and what final form Brexit took,” Archer said.

UK inflation rise could cause recession

However, economists and experts warned that the growth could turn into a recession if UK inflation rises.

Nancy Curtin, chief investment officer of Close Brothers Asset Management, said: “With investors already on edge over a global slowdown, they remain eagle-eyed for any further indication of weakness at home. If inflation starts to slide, concerns will increase that we are heading towards a deflationary recession.

“With the no-deal Brexit cause rejuvenated, political uncertainty continues to wrack the minds of investors, and businesses are refraining from deploying capital. The UK economy will likely remain sluggish until the Brexit dilemma is finally resolved.”

By Joe Curtis

Source: City AM

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British Pound Sheds Value on News UK Economy Shrank in April

Pound Sterling reacted negatively to data out Monday that shows the UK economy shrank 0.4% in April 2019 according to the latest set of monthly growth data from the Office for National Statistics.

Markets had been expecting a disappointing reading, although not by this margin, as the estimate by economists was for a decline of 0.1%.

The disappointment corresponded with a fall in the Pound-to-Euro exchange rate from 1.1250 to 1.1225, while the Pound-to-Dollar exchange rate fell from 1.2718 down to 1.2695.

We were not anticipating much of a reaction to the data by Sterling, however it appears the scope of the disappointment could not be ignored by foreign exchange markets.

The ONS report that while the economy shrank 0.4% in April, it grew 0.3% in the three months to April.

“GDP growth showed some weakening across the latest 3 months, with the economy shrinking in the month of April mainly due to a dramatic fall in car production, with uncertainty ahead of the UK’s original EU departure date leading to planned shutdowns,” says Rob Kent-Smith, Head of GDP at the ONS. “There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK’s original EU departure date has faded.”

Separate data released by the ONS shows the manufacturing sector contracted 3.9% on a month-on-month basis in April, where forecasts had suggested the market was eyeing a shallower decline of -1.1%.

Industrial production meanwhile contracted 2.7% in April where markets were expecting contraction of 0.7%.

The disappointing data heaps further pressure on Sterling which is already struggling under the yoke of political uncertainty with the Conservative Party’s leadership race now fully underway and suggesting that the likely winner will only see success if they are open to courting a ‘no deal’ Brexit.

Pound Dollar

Above: The clear reaction by Sterling against the Dollar to the GDP data release.

GDP and Pound Euro

Above: The clear reaction by Sterling against the Euro to the GDP data release

“Sterling though has clearly been unwilling to completely write off the weakness, perhaps also concerned that the drop in industrial sector output is a sign of some of the disruption that could be to come, if the UK were to face a very disorderly Brexit. Indeed, Sterling has fallen to stand at $1.2685 against the USD, from around $1.2725 before the data,” says Victoria Clarke, an economist with Investec.

Bank of England financial modelling suggests under a ‘no deal’ Brexit there would be a negative hit to the UK economy and a substantial readjustment lower in the value of the Pound.

The economic statistics out Monday will serve as a reminder to currency traders and investors that the UK faces significant economic vulnerabilities over coming months due to ongoing political uncertainty.

Responding to the data, James Smith, Developed Markets Economist at ING Bank, says the slippage in UK economic activity in April “is almost entirely down to a Brexit-related correction in manufacturing.”

The outlook for the economy going forward remains difficult says Smith:

“The wider growth story continues to look fairly bleak. While consumer spending may be a little stronger given the modest improvement in real wage growth, investment is likely to continue falling over the summer as Brexit uncertainty weighs on decision-making.”

Expectations for further uncertainty on the horizon is expected to ensure the Bank of England opts to keep interest rates unchanged for the remainder of the year.

“Rising concerns about a possible ‘no deal’ Brexit, as well as the growing likelihood of a general election in the autumn, make it more likely that the central bank remains on hold through this year,” says Smith.

For Sterling, an interest rate rise – in response to rising wages and inflation – would have offered a rare source of support as currencies tend to rise when their central bank is raising interest rates.

However, it now looks as though the UK’s resilient economy might no longer offer the support the Pound has come to rely on over recent months.

John Hawksworth, Chief Economist at PwC, says the UK should however avoid recession and see modest growth over coming months:

“After a strong first quarter, GDP fell back sharply in April due to planned car factory shutdowns and the reversal of stockbuilding before the original Brexit date.

“Looking through these temporary fluctuations, underlying growth in the UK economy remains modest as Brexit-related uncertainty continues to weigh on business investment. Modest growth seems likely to continue through the summer and autumn, bearing in mind also the drag on business confidence from rising global trade tensions.”

rolling three month GDP growth

PwC reckon robust consumer spending courtesy of continued jobs growth and rising real earnings over the past year, as well as increased government spending, should buoy the economy.

“Balancing these positive and negative effects, we expect UK GDP growth to remain modest, averaging around 0.2% per quarter over the rest of the year,” says Hawksworth.

Written by Gary Howes

Source: Pound Sterling Live

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Sluggish economic growth to continue as demand for lending falls

The UK economy’s sluggish growth shows no signs of letting up, with all three major lending classes set to grow less than two per cent this year, new figures have revealed.

Despite an uptick in real incomes, demand for consumer credit is forecast to grow just 1.6 per cent this year and two per cent in 2020, the lowest rate of growth since 2013, according to the EY Item Club.

Mortgage lending will also remain stagnant, rising less than one per cent, as consumer confidence and a lack of supply continues to hit the property market.

Meanwhile, continued uncertainty around Brexit means business lending is expected to grow only 1.3 per cent this year, as businesses hit pause on major investment plans.

The sluggish forecast across lending classes is a best-case scenario based on a Brexit deal being reached by 31 October. Growth would be even lower if the UK were to crash out of the EU without a deal, according to EY.

“The weak economic outlook continues to hold back demand for lending,” said Omar Ali, EY’s UK financial services managing partner.

“It’s been a similar story for over a decade now and there’s little improvement in sight. Since the financial crisis, the expectation was that the economy would return to higher growth after a short period of sluggishness – this has never materialised and is not forecast to happen any time soon.”

It comes amid a slowdown in growth across the wider UK economy, which grew 1.4 per cent last year, its slowest rate since 2009. GDP growth is forecast for just 1.3 per cent this year, rising marginally to 1.5 per cent in 2020.

By James Warrington

Source: City AM

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UK business confidence remains negative

The ICAEW Business Confidence Monitor (BCM) suggests that GDP growth could drop from 0.5% in Q1 to 0.2% in Q2, due to the impact of stock building, which “probably temporarily boosted GDP”.

“Businesses I speak to say that there is no sense that things will change much in the next few months and this is reflected in their confidence. Many have stockpiled ahead of the expected March exit from the European Union, but this did not happen. Stockpiling is expensive for businesses, but it did boost GDP growth,” said Michael Izza, ICAEW chief executive.

“However, my fear is that this will have an impact on growth and GDP figures in the rest of the year, so we should not be surprised to see even lower growth than normal while companies use up the excess stock they now have,” added Izza.

Stock building of raw materials and components is most widespread among businesses in the manufacturing sector.

Business confidence remains negative (-16.6) but has not fallen sharply for the first time in year. Transport and storage (-26.7) and property (-26.1) are the least confident sectors, according to the BCM.

Sales growth has been “slow and steady” and is predicted to remain so for the year. Employment is also growing slowly, said ICAEW.

By Raymond Doherty

Source: Economia

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UK economy to lose 3.5 percent of GDP in no-deal Brexit – IMF

Britain will suffer economic damage equivalent to the loss of at least 2-3 years of normal growth between now and the end of 2021 if it leaves the European Union without an exit deal, the International Monetary Fund warned on Tuesday.

The world’s fifth-biggest economy could quit the EU as soon as Friday, disrupting its ties with the bloc that it joined 46 years ago, if Prime Minister Theresa May cannot agree a delay with EU leaders on Wednesday.

The IMF said that even in a relatively orderly no-deal Brexit scenario — with no delays at borders and minimal financial market turmoil — the economy would grow 3.5 percent less by the end of 2021 than it would under a smoother Brexit.

“The increase in trade barriers has an immediate negative impact on UK foreign and domestic demand,” the IMF said.

The EU economy would suffer too but by much less than Britain, facing an estimated 0.5 percent hit to gross domestic product compared with a smooth Brexit scenario, the IMF said.

British exports to the EU and other countries which have trade deals with the bloc would face new tariffs and regulatory barriers if Britain reverted to the World Trade Organisation rules favoured by some Brexit supporters.

Supporters of an abrupt Brexit have accused the IMF of making politically motivated forecasts in the past.

In its report on Tuesday, the fund said a worse-case no-deal Brexit scenario involving border delays and financial market turmoil would increase the damage to about 4 percent of GDP by 2021.

The forecasts took into account the British government’s plans not to impose tariffs on most categories of imports in the event of a no-deal Brexit, and also assumed that the Bank of England would cut interest rates.

BoE Governor Mark Carney gave broadly similar estimates of the cost of a no-deal Brexit last month, when he said preparations by government and businesses could mitigate only some of the damage of a no-deal Brexit.

A spokesman for Britain’s finance ministry said the government wanted to leave the EU with a deal but was getting ready for a possible no-deal Brexit.

The IMF downgraded its forecast for economic growth in Britain this year to 1.2 percent from a forecast of 1.5 percent it made three months ago, which would be the weakest since 2009.

Growth for 2020 was seen picking up to 1.4 percent, but in both years Britain’s economy was predicted to grow less than the euro zone, in contrast to before the 2016 Brexit referendum.

“The downward revisions … reflect the negative effect of prolonged uncertainty about the Brexit outcome, only partially offset by the positive impact from fiscal stimulus announced in the 2019 budget,” the IMF said.

The BoE should take a “cautious, data-dependent” approach to monetary policy, it added.

Reporting by David Milliken; Editing by William Schomberg

Source: UK Reuters

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UK economy to lose 3.5 percent of GDP in no-deal Brexit – IMF

Britain will suffer economic damage equivalent to the loss of at least 2-3 years of normal growth between now and the end of 2021 if it leaves the European Union without an exit deal, the International Monetary Fund warned on Tuesday.

The world’s fifth-biggest economy could quit the EU as soon as Friday, disrupting its ties with the bloc that it joined 46 years ago, if Prime Minister Theresa May cannot agree a delay with EU leaders on Wednesday.

The IMF said that even in a relatively orderly no-deal Brexit scenario — with no delays at borders and minimal financial market turmoil — the economy would grow 3.5 percent less by the end of 2021 than it would under a smoother Brexit.

“The increase in trade barriers has an immediate negative impact on UK foreign and domestic demand,” the IMF said.

The EU economy would suffer too but by much less than Britain, facing an estimated 0.5 percent hit to gross domestic product compared with a smooth Brexit scenario, the IMF said.

British exports to the EU and other countries which have trade deals with the bloc would face new tariffs and regulatory barriers if Britain reverted to the World Trade Organisation rules favoured by some Brexit supporters.

Supporters of an abrupt Brexit have accused the IMF of making politically motivated forecasts in the past.

In its report on Tuesday, the fund said a worse-case no-deal Brexit scenario involving border delays and financial market turmoil would increase the damage to about 4 percent of GDP by 2021.

The forecasts took into account the British government’s plans not to impose tariffs on most categories of imports in the event of a no-deal Brexit, and also assumed that the Bank of England would cut interest rates.

BoE Governor Mark Carney gave broadly similar estimates of the cost of a no-deal Brexit last month, when he said preparations by government and businesses could mitigate only some of the damage of a no-deal Brexit.

A spokesman for Britain’s finance ministry said the government wanted to leave the EU with a deal but was getting ready for a possible no-deal Brexit.

The IMF downgraded its forecast for economic growth in Britain this year to 1.2 percent from a forecast of 1.5 percent it made three months ago, which would be the weakest since 2009.

Growth for 2020 was seen picking up to 1.4 percent, but in both years Britain’s economy was predicted to grow less than the euro zone, in contrast to before the 2016 Brexit referendum.

“The downward revisions … reflect the negative effect of prolonged uncertainty about the Brexit outcome, only partially offset by the positive impact from fiscal stimulus announced in the 2019 budget,” the IMF said.

The BoE should take a “cautious, data-dependent” approach to monetary policy, it added.

By David Milliken

Source: UK Reuters

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UK economy ‘losing £600m because of Brexit every week’

Brexit has cost the UK economy £600 million a week since the referendum, and the shock of a no-deal divorce could hammer the country even harder.

A new report published by investment banking giant Goldman Sachs suggests that, since the June 2016 vote, nearly 2.5 per cent has been shaved off GDP.

It argues that, had UK voters opted to remain, the economy would have been in a much stronger position, instead of underperforming and lagging behind other advanced economies.

Goldman’s number crunchers concluded that investment has been one of the biggest casualties of the Brexit debacle, confirming official data which has shown it in decline.

“The component-level breakdown reveals that output losses have been concentrated in investment and private consumption,” they said.

“The outsized impact on investment suggests that political uncertainty associated with the Brexit process may, indeed, be one of the major sources of the economic cost of Brexit.”

The report echoes Bank of England analysis that suggested around £40 billion per year, or £800m a week, of lost income for the country as a whole since the result of the leave vote.

Goldman added that under a no-deal scenario, favoured by the most extreme Tory Brexiters, the UK will be a big loser, but its European neighbours would also suffer.

It said: “Under our ‘no-deal’ scenario, the UK suffers large output losses, in conjunction with a substantial global confidence shock marked by a sharp sterling depreciation. European countries would be most exposed to this scenario and could see output losses of around 1 per cent of real GDP.”

Conversely, a “status quo” Brexit transition deal would reverse part of the UK’s output underperformance and, under a remain scenario, the UK “fully recoups Brexit-related output costs and business confidence rebounds”.

Separate figures yesterday showed Brexit stockpiling helped fuel a surge in manufacturing output last month as firms sought to avoid being caught short ahead of what was supposed to be Britain’s departure from the EU.

The Markit/CIPS UK manufacturing purchasing managers’ index showed a reading of 55.1 last month compared with the 52.1 recorded in February. It represents a 13-month high and beat expectations from economists, who forecast a reading of 51.2. A figure above 50 indicates growth.

Rob Dobson, director at IHS Markit, which compiles the survey, said: “Output, employment and new orders all rose as manufacturers and clients raced to build safety stocks. Stocking of finished goods and input inventories surged to new survey-record highs.”

Source: Scotsman

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UK Economy Roars Back to Life in New Year with Strong GDP Beat

– UK economy rebounds with a bang in January as GDP rises 0.5%.

– Rebound more than offsets -0.4% decline seen back in December.

– And may be enough for markets to keep faith with BoE rate hike bets.

The UK economy rebounded from its December slump early in the New Year, according to Office for National Statistics (ONS) figures released Tuesday, and momentum behind the recovery could be enough to ensure financial markets keep faith with hawkish bets about Bank of England (BoE) interest rate policy.

The UK economy grew by 0.5% in January, which more than reverses the -0.4% decline seen back in December, when markets had been looking for only a 0.2% increase in the New Year.

All main sectors of the economy contributed to growth during the January month, with the exception of agriculture, although the standout performer was the construction sector which saw output rise by 2.8%. However, that simply reverses a -2.8% decline from December.

“The larger than expected monthly increase in GDP of 0.5% in January (consensus 0.2%) is a reassuring sign that, up until January at least, the UK economy was weathering the political crisis at home and slowdown overseas pretty well,” says Andrew Wishart, an economist at Capital Economics.

“The rebound in GDP in January, after December’s 0.4% month-to-month drop, is a timely reminder that the PMIs aren’t a reliable indicator of the economy’s momentum when political uncertainty is elevated,” says Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Tuesday’s report comes after IHS Markit PMI surveys of the services, construction and manufacturing sectors suggested strongly that the economy ground to a halt in January.

Those PMI surveys continued to point toward economic stagnation after ONS data revealed the December GDP contraction, leading to increased speculation that the economy had hit a rough patch just as the March 29, 2019 Brexit day appeared on the horizon.

ONS figures for January show the economy rebounding resolvedly from its December trough but the UK economic picture painted by Tuesday’s numbers is entirely different when viewed over a longer horizon, because GDP grew by just 0.2% for the three months to the end of January.

Above: Sectoral contributions to UK GDP growth on a three-month basis.

Quarterly growth was led by a robust expansion in the services sector but the increase was unchanged from the 0.2% pace of growth seen in the final quarter of 2018 and takes the shine off of Tuesday’s headline.

On a three-month basis the services sector expanded by 0.38% while output from the construction sector declined -0.04% and output from the industrial sector fell -0.12%. However, economists say the pace of growth in the January month alone could be more important for the outlook than the three-month number.

“January’s increase in GDP exceeded even our top-of-the-range 0.4% forecast, so we are revising up our forecast for quarter-on-quarter growth in Q1 to 0.3%, from 0.2%. This implies that little, if any, excess capacity will open up in the first half of the year, giving the MPC little time to delay another rate hike if, as we expect, GDP growth regains some momentum once a Brexit deal has been signed off,” says Tombs.

Tuesday’s data follows a year in which UK GDP grew by just 1.4% after the economy expanded by 0.2% in the final quarter, 0.6% in the third quarter, 0.4% in the second quarter and just 0.1% in the first quarter. That was the weakest expansion since 2012, and one that many economists have attributed to uncertainty over the Brexit process.

First quarter GDP growth has tended to be weak in recent years and given the performance of the economy in 2018, expectations for the New Year period in 2019 have been particularly downbeat. But some economists are telling their clients that Tuesday’s figures could mean this year is different.

“There is no denying that today’s figures suggest the economy is weathering the Brexit storm remarkably well,” says Wishart of Capital Economics. “Of course, the data may deteriorate in February and March if Brexit has caused consumers and firms to reach for the handbrake. But note that even if monthly GDP growth is zero in February and March, the economy would still grow by 0.4% in Q1. As a result, we are happy to stick with our 0.3% q/q forecast.”

UK economy

Above: UK GDP growth trends.

Currency markets care about the GDP data because of what it might mean for Bank of England interest rate policy. Rising demand within an economy can often mean increased inflation pressures, and it is changes in the consumer price outlook that dictate BoE interest rate decisions.

The BoE has raised rates by 25 basis points on two occasions since the referendum in 2016, taking the Bank Rate up to 0.75%, and it’s said repeatedly in recent months that elevated inflation and a robust outlook for consumer price pressures mean it’ll need to keep raising rates in the coming quarters.

However, pricing in the overnight-index-swap market implies a BoE bank rate of just 0.81% for December 19, 2019, which is just 6 basis points above the current cash rate and suggests strongly that investors have only limited appetite for betting on a BoE rate hike coming this year.

The actual Bank Rate that would prevail if the BoE were to hike again is 1%. As a result, there is significant scope for investors to price-in BoE policy action for 2019, which would be positive for Pound Sterling exchange rates if such a thing were to happen.

Many economists say a deal facilitating an orderly exit of the UK from the EU would be enough to persuade the BoE to come off the sidelines and lift its interest rate again.

By James Skinner

Source: Pound Sterling Live