UK Economy Perks Up

In its preliminary estimate, the UK Office for National Statistics reported third quarter GDP growth of 0.40% compared to the 0.30% expansion witnessed a quarter earlier. Spending in the all-important services sector continued to boost the economy's performance, while construction extended its struggle. While yesterday’s figures gave a small boost to under-fire Finance Minister Philip Hammond ahead of a November budget announcement, they could not materially alter the broad picture of an economy bogged down by squeezed living standards and poor productivity.

With growth on track and inflation above the Central Bank’s target, hints of policy tightening may mark next week’s decision as the Bank of England responds to price pressures and Brexit.  Sterling advanced to its highest point in more than a week versus the US dollar after the GDP release. GBPUSD is currently trading around 1.3255, with 1.3310 representing immediate resistance.

Orders for US-made long-lasting goods increased more than forecast in September, indicating robust business spending that should help ease the drag from hurricane season on the economy. Orders rose 2.20% last month, easily topping the consensus estimate calling for a 1.00% increase. Excluding transportation, durable goods orders gained 0.70% according to the Commerce Department report.

Core capital-goods orders, a closely-watched proxy for business investment, climbed for a third straight month, expanding by 1.30% and topping expectations of a 0.50% month over month rise. Separate data released Wednesday showed US sales of new single-family homes rallying to a near 10-year high in September. On a seasonally adjusted basis, sales of new houses jumped 18.90% to an annual rate of 667,000, beating market expectations of a -0.90% decline. In the meantime, the dollar is pulling back, with USDCHF down in Thursday Asian trade to around 0.9885.