Slow and Steady UK GDP

Market Trends - 27/10/2015

Due to a slow global economy and a commodities market with prices in the trench, the Europe has been suffering stagnant growth. The third largest constituent country, the UK, is now reporting that the domestic trend is running parallel to the global, with the most recent GDP numbers showing a decline to 0.50% quarterly growth. This is already a dismal number, but even worse when compared to expectations of 0.60% and examined on the backdrop of an annual figure that shrunk 0.10% as well. Sliding construction and a -0.90% annual manufacturing print are likely the culprits behind the disappointing results, although the important services sector and agricultural production numbers are reporting upticks in their statistics. This may float the outlook slightly, but the decline in the latest construction purchasing manager’s index that has gone from 1.40% to -2.20% will no doubt keep perspective firmly negative.

Part of the drop in construction, specifically, may be attributed to policies implemented by the Bank of England designed to inform borrowers from the Bank about the financial environment and the possibility of a rate hike. The drop is more likely due to global conditions, however, with PMI readings from many major economies showing declines. Other ideas come from the UK Office of National Statistics, whose representatives have stated that they believe the economy is still expanding and that recent construction-related statistics have been negatively affected by recent inclement weather in the area. The original expectation for yearly GDP growth in the UK was forecast at 2.50%, so the current 2.30% the country is on track to accomplish may not be terribly far off. However, the Bank of England will still be able to use the discrepancy as ammunition in order to postpone an early 2016 rate hike, if they so choose. This would likely have adverse effects on the Pound.


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