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

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  • 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.

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.

Gold

Gold Gained Ahead of Joe Biden Inauguration 2021

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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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Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.

Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.

While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.

On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”

“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.

Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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