The UK’s latest GDP figure came in as predicted by many of the economists polled, but growth at 1.5% annual is still lower than the 1.6% Q2 2010 figure the coalition government. in the UK inherited from the previous government. Despite the 0.8% rise in activity in the last quarter, Britain’s economy is still 2.5% smaller than before the last recession struck in 2008 and according to a deputy governor at the BoE, growth is 7% below the figure where it should be had the current UK government not pursued a policy of austerity to attempt to get control of the UK’s deficit.
Despite reducing the deficit by circa £40 bn since taking office the UK’s national debt has spiked to circa £1.2 bn with the projection from the UK’s Office For Business Responsibility predicting that the overall debt will rise £70 bn more than expected in 2014 and breach £1.4 trillion at end 2015. That will be an extra £600 bn added to the UK national debt since the current UK government. took office.
Change in gross domestic product (GDP) is the main indicator of economic growth. GDP increased by 0.8% in Q3 2013 compared with Q2 2013. Output increased in all four main industrial groupings within the economy in Q3 2013 compared with Q2 2013. Output increased by 1.4% in agriculture, 0.5% in production, 2.5% in construction, and 0.7% in services. Output from services is now slightly above its previous peak in Q1 2008, prior to the economic downturn. In Q3 2013 GDP was estimated to be 2.5% below the peak in Q1 2008. From peak to trough in 2009, the economy shrank by 7.2%. •GDP was 1.5% higher in Q3 on an annual basis.
German Ifo Business Climate Falls Slightly
The Ifo Business Climate Index for industry and trade in Germany fell slightly for the first time after five increases. Firms assessed their business outlook slightly less optimistically than last month. Assessments of the current business situation were somewhat less positive, but remain above average. The German economy has not yet moved fully into gear. The business climate indicator in manufacturing fell. Assessments of the current business situation were less positive. Although business expectations fell slightly, manufacturers nevertheless remain optimistic about future business developments.
Investment in a slump, says Australia’s RBA
The level of investment amongst Australia’s non-mining businesses is at its lowest since the 1990s recession as the global financial crisis has made many executives reluctant to start taking risks again, the Reserve Bank says. The record-low levels of investment come despite banks saying they are willing to lend and despite interest rates being at record lows. The yield on Australia’s benchmark 10-year yield dropped two basis points, or 0.02 percentage point, to 3.97 percent. It has fallen 15 basis points this week. The Australian dollar fell 0.2 percent to 96.05 U.S. cents, a 0.8 percent retreat since Oct. 18th.
Market snapshot at 10:15 UK time
The MSCI Asia Pacific Index of shares lost 0.8 percent, sapping demand for higher-yielding assets. Asian bourses failed to extend the momentum seen in the USA on Thursday, concerns of a liquidity squeeze in China continued to weigh on markets. Japanese inflation remained close to its highest level in five years in September, government data showed on Friday, as a weaker yen pushed up the cost of imported oil and gas. Prices excluding energy and fresh food were unchanged from a year earlier, after sliding every month since December 2008. The Nikkei closed down sharply by 2.75%, the CSI down 1.33% and the Hang Seng by 0.61%.
The main European markets are down in the morning session, STOXX index down 0.36%, FTSE down 0.08%, CAC down 0.44%, DAX down 0.16%, the Athens exchange is up 1.20% the most on the day in Europe.
Commodities have experienced mixed fortunes on the day, ICE WTI oil is up 0.27% at $97.37 per barrel, NYMEX natural is down 0.50% at $3.61 per therm, COMEX gold is down 0.41% at $1344.70, with silver on COMEX down $22.46 per ounce.
Equity index futures for the USA bourses are suggesting that the USA markets will open down moderately, the DJIA down 0.05%, the SPX equity index future is down 0.13%.
Forex focus
The dollar slid 0.2 percent to $1.3824 per euro early in the London trading session after touching $1.3832, the weakest since November 2011. It sank 0.2 percent to 97.05 yen after reaching 96.94, the lowest level since Oct. 9th. For the week, the greenback is poised for a 1 percent drop versus the euro and a 0.7 percent decline versus the yen.
Sterling was little changed at $1.6206 in the morning London session after rising to $1.6257 on Oct. 23rd, the highest since Oct. 1st. It has gained 0.3 percent versus the U.S. currency this week. Sterling traded at 85.24 pence per euro after depreciating to 85.55 pence yesterday, the weakest level since Aug. 29th. The pound headed for a second weekly gain versus the dollar before the ONS report.
Bonds
U.K. government bonds were little changed, with 10-year gilt yields at 2.62 percent. The rate fell to 2.59 percent on Oct. 23rd, the lowest since Aug. 27th. The price of the 2.25 percent bond maturing in September 2023 was at 96.765. The two-year gilt yielded 0.44 percent.
Gilts lost 2.4 percent this year through to yesterday. Treasuries fell 1.9 percent and German securities slid 1.5 percent. The Bank of England will expand the range of collateral it accepts in its facilities and offer money for longer periods on cheaper terms, Carney said in a speech in London late yesterday.
