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U.K. Economy Dismisses Brexit Threat

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UK Economy
  • U.K. Economy Dismisses Brexit Threat

The U.K. economy grew faster than economists forecast in the fourth quarter, continuing to defy expectations that the Brexit vote would derail the expansion.

The 0.6 percent gain beat the 0.5 percent median forecast of economists in a survey and marked a 16th straight quarter of growth. It was driven entirely by services, helped by consumer spending, with zero support from production and construction, the Office for National Statistics said on Thursday.

The economy has performed better than predicted since the vote to leave the European Union in June, though the latest data show that it remains overly reliant on one sector. The support from consumers could weaken this year as the pound’s decline pushes up inflation, squeezing real incomes.

“The economy’s brisk growth at the end of 2016 has all the hallmarks of being driven by an unsustainable consumer spending spree,” said Samuel Tombs, an economist at Capital Economics in London. “We continue to expect slowdowns in business investment and consumer spending to cause GDP growth to slow to an average quarter-on-quarter rate of just 0.2 percent or so in 2017.”

Companies from airline EasyJet Plc to telecommunications firm BT Group Plc have this month cited Brexit-linked problems such as a weaker pound and loss of business as they offered investors a forbidding outlook for this year. The U.K. currency has dropped 15 percent since the referendum in June. It weakened following the GDP data and was at $1.2608 as of 10:52 a.m. London time, down 0.2 percent on the day.

The fourth-quarter estimate, based on 44 percent of the data that will ultimately be available, showed that services surged 0.8 percent, offsetting stagnation in industrial production. Manufacturing rose 0.7 percent. The growth meant the economy expanded 2 percent in 2016, though that’s down from 2.2 percent the previous year and marked the weakest since 2013. Economists forecast a further slowdown this year, to 1.2 percent.

Brexit Talks

Prime Minister Theresa May plans to start formal talks on leaving the EU by the end of March. She has indicated that she wants to withdraw from the bloc’s single market for goods and services, an outcome that economists say will hurt trade.

For now, the near term is looking brighter than anticipated, a fact acknowledged by Bank of England Governor Mark Carney this month. While he expects growth to cool in 2017, he’s indicated the BOE may raise its forecasts in February at its next policy decision.

Carney was among the economists who warned before the referendum that the U.K. might have faced a recession if Britons voted Leave. Pro-Brexit campaigners have pointed to the economy’s resilience as evidence that leaving the EU won’t make the country worse off.

On an annualized basis, the U.K. economy grew 2.4 percent in the fourth quarter. The U.S. is forecast to have expanded 2.2 percent in the period, down from 3.5 percent in the three months through September.

U.K. GDP per capita grew 1.3 percent in 2016, down from 1.4 percent the previous year. It’s now 1.9 percent above its level in the first quarter of 2008, the pre-crisis peak for GDP.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

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naira

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.

This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.

In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.

The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.

Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.

She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.

She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.

Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.

“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.

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Commodities

Crude Oil, Other Commodities Closing Price for Monday

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Crude oil

Crude Oil, Other Commodities Closing Price for Monday

Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.

Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.

The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.

Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.

The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.

According to Michael McCarthy, the Chief Market Strategies, CMC Markets, the surged in gold price is a result of the projected drop in dollar value or uncertainty.

He said, “The key factor appears to be the (U.S.) currency.”

As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.

Also, the effectiveness of the vaccines can not be ascertained until wider rollout.

Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.

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