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U.K. Economy Slows More Than Forecast as Consumers Cut Back

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U.K. inflation
  • U.K. Economy Slows More Than Forecast as Consumers Cut Back

The U.K. economy posted its worst performance in a year as the dominant services industry felt the impact of an intensifying squeeze on living standards.

Growth slowed to 0.3 percent in the first quarter from 0.7 percent in the final three months of 2016, the Office for National Statistics said on Friday. The figure was weaker than the 0.4 percent forecast by economists in a Bloomberg survey. Services grew just 0.3 percent, the least since the start of 2015.

Having made Britain the strongest-growing Group of Seven economy bar Germany last year, consumers are now cutting back in response to rising prices brought on by the depreciation of the pound since the June Brexit vote and higher oil costs.

Households and businesses are also facing a period of heightened uncertainty as Britain prepares for a general election and the start of two years of negotiations to leave the European Union.

Prime Minister Theresa May is hoping to capitalize on her huge lead in polls to increase her Parliament majority in the election, though signs of weakness in the economy will give the opposition parties ammunition to attack her policies.

The downturn in services, which account for 79 percent of the economy, was driven by consumer-focused industries such as retailers, hotels and restaurants. Together, they fell 0.5 percent. Transport, storage and communication declined 0.2 percent. Services overall slowed from growth of 0.8 percent in the fourth quarter.

Industrial production rose 0.3 percent, with buoyant exports — the result of the weak pound — helping manufacturers increase output by 0.5 percent. Construction rose just 0.2 percent.

The data for March are based on estimates and early responses to survey questions. They show industrial production falling 0.7 percent that month — the third consecutive decline — and services output unchanged following a 0.2 percent increase in February. Construction is estimated to have increased 0.3 percent.

The U.K. is the first G-7 nation to report GDP for the first quarter. The U.S. follows later Friday, with economists predicting annualized growth of 1 percent, down from 2.1 percent in the previous three months. The equivalent first-quarter rate for the U.K. was 1.2 percent.

Further evidence of the squeeze on households emerged Friday, with separate surveys showing house prices fell for a second month in April and consumer confidence dipped to the lowest since July.

And the pressure is expected to intensify, economists say. Inflation is pulling ahead of earnings and a record-low saving ratio means people have little room to maintain their spending by setting aside less.

GDP rose 2.1 percent from the first quarter of 2016. Output per head grew just 0.1 percent from the fourth quarter.

The first-quarter GDP estimate is the first of three, based on only 44 percent of the information that will ultimately be available.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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