FXStreet (Mumbai) – UK’s Q4 GDP data will be released today at 9.30 GMT. Quarter on quarter, GDP is estimated to have increased 0.5 per cent in Q4. Year on year, GDP has likely grown 1.9 per cent in Q4, slower than the 2.1 per cent growth rate seen previously. GDP is forecast to have eased to 2.2% for 2015, down from 2.9% the year before.
UK Chancellor George Osborne has warned that UK faced a “dangerous cocktail of new threats” from falling commodity prices, recessions in Brazil and Russia as well as political tensions in the Middle East.
Oil price is on a free fall, hitting multi year lows and sending jitters among traders and policy makers in big economies alike. Oil price has fallen 70 per cent from its peak in June 2014. It is currently hovering around $30 per barrel mark. This slump in oil has kept prices in check in all large economies causing inflation to fall sharply and sparking fears of a slowdown. BoE Governor Carney noted ”Due to the oil price collapse, inflation has fallen further and will likely remain very low for longer.”
The poor performance of the emerging economies led by China is also a cause of concern for the leading central banks. China’s transition from exports and manufacturing dependent economy to a consumer led growth model has led to a widespread fall in commodity prices.
Considering these factors, The BoE has decided to keep its rates on hold for now. The falling inflation rate and poor growth of wages has eased the pressure on the central bank to move rates up from the record low of 0.5 per cent. Governor Carney has said ”now is not yet the time” to hike rates as he feels “The world is weaker and UK growth has slowed.”The latest independent forecasts from Office for Budget Responsibility (OBR) showed UK growth in 2015 at 2.4 per cent. Markets broadly expect UK to miss this growth target.
The revised figures of ONS showed growth of 0.4% in the third quarter to the end of September, lower than the initial estimate of 0.5%. Growth was also revised down to 0.5% for the second quarter to the end of June, from the 0.7% noted earlier. Revisions were made post the release of official data which showed extremely poor borrowing in November, which was up by a mere £1.3 billion year-on-year to £14.2 billion. ONS data also revealed how poor performance in the construction sector negatively impacted gross domestic product growth in Q3. The poor growth in the construction sector subtracted 1.9 per cent from the GDP quarter-on-quarter. UK’s manufacturers and exporters have also had to feel the pinch of weak global economic outlook and strong pound.
IHS Global Insight chief UK & European economist Howard Archer feels that UK on account of “significant domestic and global uncertainties” is “clearly finding growth hard to come by”.
(Market News Provided by FXstreet)