Economy slows but not as much as expectations

Britain’s economic growth slowed only slightly in the three months after the Brexit vote, official data showed this morning defying warnings of a heavy hit and further diminishing the likelihood of the Bank of England cutting rates next week.

The economy grew by 0.5 percent in the July-September period, less rapid than the unusually strong growth of 0.7 percent seen in the second quarter but comfortably above the forecast of 0.3 percent.

Britain’s dominant services industries provided all the growth, helped by a boom in the film and television sector as the latest releases in the Jason Bourne and Star Trek series hit the screens along with other blockbusters.

Sterling jumped to a one-week high against the U.S. dollar after the data and the yield on 10-year government bonds hit its highest level since the European Union membership referendum as investors discounted the chance of a BoE rate cut on Nov. 3.

Compared with the third quarter of last year, growth picked up to 2.3 percent, the strongest pace in more than a year, per the preliminary figures from the ONS.

Brexit supporters said the figures backed their argument during the referendum campaign that warnings of a big hit to the economy from a Leave vote were little more than scaremongering.

The central bank is due to decide next week whether to cut interest rates further below their all-time low of 0.25 percent, something it hinted at last month. But Governor Mark Carney suggested this week that he was worried about the sharp fall in the value of the pound and how that will push up inflation.

The GDP data killed the chance of a rate cut next week and could also prompt the Bank’s most stimulus-sceptical policymaker Kristin Forbes to call for an end to its bond-buying.

A poll of economists has shown the BoE is not expected to ease policy until early 2017.

Finance minister Philip Hammond will pay close attention to Thursday’s figures too. He is due to announce his first budget plans on Nov. 23 and has said he could approve higher levels of public spending if needed to help the economy.

He said the GDP data showed the resilience of Britain’s economy but he also warned of tougher times ahead as the country launches into tough Brexit negotiations with the EU next year.

Leave a Reply

Your email address will not be published. Required fields are marked *

What's Going On?

Currencies 4 You Ltd is a company registered in England and Wales (registered no. 06866898). Registered office: Regus House Victory Way Admirals Park, Crossway, Dartford, Kent, DA2 6QD. Currencies 4 You Ltd Payment and Foreign Currency Exchange Services are provided by Currency Cloud Limited, Equals Connect Limited and Ebury Partners UK Limited. Currency Cloud Limited. Registered in England No. 06323311. Registered Office: Stewardship Building 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 for the issuing of electronic money. FCA registration number: 900199. Payment Services are provided by Equals Connect Limited, registered in England and Wales (registered no. 07131446). Registered Office: Vintners’ Place, 68 Upper Thames St, London, EC4V 3BJ. Equals Connect Limited are authorised by the Financial Conduct Authority to provide payment services (FRN: 671508). Currencies 4 You Ltd is partnered with Ebury Partners UK Limited as its Programme Mananger. Ebury Partners UK Limited are authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution. (Reference Number 900797). Ebury Partners UK Ltd is registered with the information commissioners office with registration number: ZA345828. | Terms and Conditions | Privacy Statement | Careers