The British economy provides more signs of slowdown in economic activity
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Saturday, September 18, 2010
, Posted by Usman Ali Minhas at 1:06 PM
Financial markets started the week cheerfully, following the announcement of Basel Committee of sufficient time-frame for financial reform easing the woes off the sector; in addition, the Japanese government intervened in markets to depreciate the value of the Yen as it’s considered the main pillar for the export-led recovery.
Euro-zone
The week started with good news for the market, supporting the risk appetite and diluting the appeal of haven demand for the dollar and the yen on the expense of the euro. Financial sector’s strain eased after Basel Committee on Banking Supervision provided lenders with as long as eight years to comply with new higher capital requirements aimed at preventing future crises.
On the other hand, the European Commission added to the positivity by raise its growth estimates for the euro-zone by nearly the double; the euro economy is expected to expand by 1.7% this year compared to prior estimates of 0.9%, where the economy is expected to have grown in the third quarter by 0.5% and 0.3% in the final quarter.
As for the EU-27 it’s projected to expand by 1.8% instead of the previous estimate of 1.0%. Germany is expected to grow three times more the pace projected in May by 3.4% alongside expansionary projections for France and Italy, while Spain is expected to contract by 0.3% down from 0.4% previously projected.
Confidence levels retreated in Germany during September, worse than market expectations, due to spending cuts enforced by major countries in the continent; in addition, confidence fell as data presented from the region expressed slowdown in economic conditions throughout the course of this year.
Switzerland
The Swiss National Bank decided to preserve its three-month Libor rate at 0.25 percent, along with preserving its monetary policy unchanged, despite the fact that franc’s advance poses constant threats to economic recovery. The bank assessed the risks of higher inflation against the Franc gains against majors.
The SNB also announced its growth and inflation projections of this year, where the bank stated that inflation will reach 0.7 percent, compared with the prior projected 0.9 percent. As for 2011, growth is projected to range among 0.9 – 1.0 percent, and in 2012 to average at 2.2 percent. Furthermore, the bank expects that the economy to expand by 2.5 percent, compared with earlier projections of 2.0 percent.
United Kingdom
Britain consumer prices continued on rising in August, above the government’s upper limit for inflation set at 3.0 percent, adding more pressures on the recovery, which will surely raise the debate among regulators whether to control inflation or remain focused on stimulating growth.
Jobless claims filling increased in August, the first since January, adding more signs to investors that economic activity will indeed slowdown in the upcoming period affected by the government spending cut that were introduced in June.
Retail sales declined in August for the first time in nearly six-years, led by the decline in book sales, sporting goods and pharmacies. The decline in retail sales data is a natural effect of rising inflationary levels, weak demand and labor conditions.
The data presented from UK is mixed and fails to report the full picture for investors, where on one side, the British economy managed to expand by 1.2 percent during the second quarter of this year, due to rising exports and capital investments; while on the other hand, tight credit conditions, rising inflation levels and weak labor sector continue on limit the economy from expanding and recovery at this faster pace.
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