Missed the recent top and mid-tier reports from the U.K.? Worry not, forex warriors! I’ve summarized the main components right here on today’s snapshot!
- Q4 2015 GDP grew by 0.5%, up from Q3 2015’s 0.4% growth.
- Annualized figure at 1.9%, lower than Q3 2015’s 2.1% growth.
- 2015 GDP expanded by 2.2%, lower than 2014’s 2.9% growth but still matches 2013’s numbers as the second-strongest post-recession year.
- The economy is relying heavily on the service sector, as concerns over weakening global demand and potential “Brexit” weigh on manufacturing and construction industries.
- Unemployment rate remains at 5.1%, the lowest since mid-2005.
- Claimant counts dropped by 14,800 in January after December’s 4,300 decline.
- Both the employment rate and number of job vacancies have jumped to record highs in January.
- Wage growth dropped to its slowest rate since February 2015.
- Low inflation is affecting the workers’ pay raise prospects.
- Annualized consumer prices up to a one-year high of 0.3% while core prices settled from 1.4% to 1.2% in January.
- Headline figures show 0.8% decline (vs. -0.7% in December) while core consumer prices dipped by 1.0% (vs. -0.8% in December).
- The increase is mostly due to oil falling less than it did last year. Alcohol and tobacco also got a big boost on beer discounts while clothing and footwear dropped due to weather.
- The manufacturing and construction industries have failed to contribute to the 2015 GDP.
- Reading PMIs: A reading above 50.0 means industry expansion while a reading below 50.0 hints at contraction.
- Manufacturing PMI surprised at 52.9 in January, its fastest pace since June 2014.
- Construction PMI dropped to 55.0, its weakest in nine months, thanks to the weakest increase in housebuilding and commercial property work.
- Services PMI at showed its strongest employment growth in three months but also its weakest 12-month outlook in three years.
- Worries over weak global demand, volatile financial markets, and possible Brexit are weighing on business sentiment.
- Retail sales in November were boosted by Black Friday promos.
- Retail sales in December is the lowest since September 2014, thanks to early holiday discounting.
- Retail sales in January is the highest in two years, thanks to post-holiday discounting and huge jumps in clothing and computer demand.
- Consumer confidence numbers reflect optimism over personal finance, but not over the U.K. economy.
- Investors needed to see a good bounce in January to show that low inflation and wages aren’t affecting consumer demand.
- Trade deficit fell to 2.71B GBP in December, down from 3.17B GBP deficit in November.
- Exports down by another 0.8% while imports dropped by 3.6%.
- Weak global demand and strong GBP aren’t helping UK’s trade numbers, but recent weaknesses in the pound are expected help prop up exports again.
- Government enjoyed its biggest tax surplus since 2008 thanks to a large volume of income tax receipts.
- The government needed “very strong” tax receipts in January to meet Chancellor’s George Osborne’s targets of a budget surplus by 2019 – 2020.
- Rightmove and Halifax house prices still show price increases, as housing demand outpaces supply.
- High employment, low interest rates, and limited housing supply are pushing house prices to their post-financial crisis prices. However, muted wage growth and climbing house prices could soon ease demand for housing.
Want a real snapshot of all those points above? Here’s a neat chart for ya!
What’s next for the U.K.?
One look at the figures above tells us that there’s a reason why the Bank of England (BOE) is one of the few central banks that are contemplating interest rate hikes. What’s holding Mark Carney and his gang back though, is the possibility that the economy’s recovery may be imbalanced.
Consumers continue to feel optimistic about the economy, as evidenced by strong retail sales and housing demand. On the other hand, concerns such as weakening global demand, strong local currency, and the possibility of a “Brexit” are keeping businesses from taking risks.
These worries have already kept the manufacturing and construction industries from contributing to economic growth in 2015 and are now threatening the U.K.’s exports and strong service industry.
Right now the BOE is keeping close tabs on consumer activity, the other major driver of the U.K.’s GDP. More specifically, the central bank wants to see steady employment and wage growth to help keep the consumers happy enough to stimulate inflation. They already know that the Brits love their shopping. The BOE just wants to make sure that they’ll have enough jobs and wages to continue doing it.