United Kingdom Country Profile - Economy, Currency, Central Bank, Canadian Dollar, CAD

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Country and Central Bank Watch

United Kingdom

The United Kingdom is the 5th largest economy in the world, with a GDP of $2.398 trillion, and a population of 60 million. The economy has experienced positive growth in every quarter since 1992, and the central bank in '06 - '07 hiked interest rates to 5.75% to stem an increase in inflation. London is the world's largest financial center, with the UK having £21bn of financial exports in 2005. Manufacturing accounts for 16% of national output and 13% of employment. UK property markets have been booming for the last seven years, but have recently shown signs of straining as interest rates climbed and financial markets were hit with a credit crunch in August '07.

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United Kingdom's Fundamental Indicators and Chart

Monthly Data for March, 2010

Date	EST	Indicator	Actual	Forecast	Previous
3/1	4:30am	Manufacturing PMI	56.6	56.5	56.7
		For February Provided by: Markit Economics Previous Release: PDF
3/1	4:30am	Net Consumer Lending	2.0B	0.7B	1.5B 1.2B
		For January Provided by Bank of England Previous Release: HTML PDF Net Consumer Credit: £0.5B, pr. £0.1B (Dec), -£0.4B (Nov), -£0.6B (Oct), -£0.3B (Sep),-£0.3B (Aug), -£0.2B (Jul), £0.1B (Jun) Net Mortg. Lend.: £1.5B, pr. £1.2B (Dec), £1.6B (Nov), £0.9B (Oct), £0.9B (Sep), £1.0B (Aug), -£0.4B (Jul), £0.3B (Jun), £0.3B (May)
3/1	4:30am	Mortgage Approvals (BOE)	48.2K	49K	59K
		For January Provided by Bank of England Previous Release: HTML PDF Net Mortg. Lend.: £1.21.5B, pr. £1.2, £1.6B, £0.9B (Oct), £0.9B (Sep), £1.0B (Aug), -£0.4B (Jul), £0.3B (Jun), £0.3B (May)
3/2	4:30am	Construction PMI	48.5	48.9	48.6
		For February Provided by: Markit Economics
3/2	7:01pm	Consumer Confidence Index (NCCI)	80	71	74 73
		For February (s.a.) Provided by: Nationwide Official Release: PDF Current Conditions: 27, pr. 23 (Jan), 20 (Dec), 20 (Nov), 22 (Oct), 19 (Sep), 17 (Aug), 16 (Jul), 17 (Jun), 18 (May), 21 (Apr), 20 (Mar) Expectations Index: 115, pr. 107 (Jan), 101 (Dec), 108 (Nov), 106 (Oct), 108 (Sep), 94 (Aug), 89 (Jul), 88 (Jun), 76 (May), 70 (Apr) Spending Index: 93, pr. 96 (Jan), 106 (Dec), 107 (Nov), 103 (Oct), 103 (Sep), 97 (Aug), 94 (Jul), 105 (Jun), 103 (May), 98 (Apr) From the Release: "The Consumer Confidence Index has risen for the second consecutive month, increasing by six points to 80 in February. This increase means that the Index now stands at its highest level since January 2008, and almost double the level recorded during the same period last year (41). The Present Situation and Expectations indices have also experienced some upward momentum at the start of 2010, with the indices rising to 27 and 115 points respectively. However, confidence in spending continued to fall away during the month and dropped four points to 93 in February. Expectations about house prices rose slightly in February, with consumers expecting the value of their home to increase by 1.5% over the next six months, compared to 1.1% in January."
3/2	7:01pm	BRC Shop Price Index y/y	1.7%		2.3%
		For February Provided by: British Retail Consortium Official Release: HTML DOC From teh Rleease: "Overall shop price inflation 1.7% in February. Food inflation slowed to 1.3% in February from 2.9% in January. Non-food inflation was unchanged at 1.9% in February. This is great news for customers. Food inflation is now at its lowest for at least three years – 12 months ago it was seven times higher. This drop has largely been driven by falling fresh food prices, mainly vegetables and fish. Previous falls in the value of the pound and large commodity price increases, which were pushing up food prices, have now largely worked through. Barring any lasting shocks, the price of food should continue to be relatively stable for some time. The VAT increase is putting pressure on overall shop price inflation but, even so, electricals, home entertainment and clothing are actually cheaper than they were this time last year. Fierce retail competition is protecting customers and keeping inflation down."
3/3	4:30am	Services PMI	58.4	55.0	54.5
		For February Provided by: Markit Official Release: PDF From the Release: "Growth of the UK service sector recovered in February from January’s snow-related slowdown, rebounding markedly to the strongest for over three years. Higher activity was closely linked to a steeper gain in new business, amid reports of strengthened market conditions. Latest data also suggested that productivity continued to improve as employment again fell modestly. However, average input costs continued to rise markedly, offset only slightly by a marginal increase in output charges"
3/4	7:00am	BOE Interest Rate Statement	0.50%	0.50%	0.50%
		Provided by: Bank of England Official Release: Statement From the Release: "The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion."
3/5	4:30am	Producer Price Index Input	0.1%	0.1%	2.0%
		Monthly Change for February Provided by: Office of National Statistics (ONS) Previous Release: HTML Input y/y: 6.9%, pr. 8.4% (Jan), 7.4% (Dec), 4.0% (Nov), 0.1% (Oct), -6.5% (Sep), -7.5% (Aug), -12.1% (Jul), -11.0% (Jun), -9.4% (May), -5.0% (Apr), -0.4% (Mar), 0.5% (Feb), 1.5% (Jan)
3/5	4:30am	Producer Price Index Output	0.3%	0.2%	0.4%
		Monthly Change for February Provided by: Office of National Statistics Output y/y: 4.1%, pr. 3.8% (Jan), 3.5% (Dec), 2.9% (Nov), 1.7% (Oct), 0.4% (Sep), -0.4% (Aug), -1.3% (Jul), -1.2% (Jun), -0.3% (May), 1.2% (Apr), 2.0% (Mar), 3.0% (Feb), 3.5% (Jan) Output Core m/m: 0.3%, pr. 0.3% (Jan), 0.7% (Dec), -0.1% (Nov), 0.3% (Oct), 0.5% (Sep), 0.2% (Aug), 0.5% (Jul), -0.6% (Jun) Output Core y/y: 2.9%, pr. 2.5% (Jan), 2.6% (Dec), 2.0% (Nov), 2.0% (Oct), 1.4% (Sep), 0.7% (Aug), 0.2% (Jul), 0.1% (Jun)
3/8	7:00pm	BRC Retail Sales y/y	2.2%		-0.7%
		For February Provided by: British Retail Consortium (BRC) Previous Release: HTML DOC
3/8	7:00pm	RICS House Price Balance	17%	34%	32%
		For February Provided by: Royal Institute of Chartered Surveyors (RICS) Previous Release: HTML PDF
3/9	4:30am	Trade Balance	-8.0B	-6.9B	-7.3B
		Visible Trade Balance for January Latest Release Provided by: National Statistics Office Current Release: HTML Total Bal.: pr. -£3.3B (Dec), -£2.9B (Nov), -£3.2B (Oct), -£3.0B (Sep), -£2.3 (Aug), -£2.4B (Jul), -£2.4B (Jun), -£1.9B (May), -£3.0B (Apr), -£2.5 (Mar), -£3.25B (Feb), -£3.58 (Jan), -£3.61 (Dec)
3/10	4:30am	Manufacturing Production	-0.9%	0.3%	0.9%
		For January Provided by: Office of National Statistics (ONS) Previous Release: PDF y/y: 0.2%, pr. -1.9% (Dec), -5.4% (Nov), -7.8% (Oct), -9.8% (Sep), -11.3% (Aug), -10.1% (Jul), -11.7% (Jun), -12.7% (May), -12.7% (Apr), -12.9% (Mar), -13.8% (Feb), -12.8% (Jan) UK manufacturing production unexpectedly fell 0.9% m/m in January, the first fall in five months, after a 0.9% m/m gain in December. January manufacturing production was up 0.2% y/y, the first year-on-year increase in almost two years.
3/10	4:30am	Industrial Production	-0.4%	0.2%	0.5%
		For January Provided by: Office of National Statistics (ONS) Previous Release: PDF y/y: -1.5%, pr. -3.6% (Dec), -5.4% (Nov), -7.8% (Oct), -9.8% (Sep), -11.3% (Aug), -10.1% (Jul), -11.7% (Jun), -12.7% (May), -12.7% (Apr), -12.9% (Mar), -13.8% (Feb), -12.8% (Jan) UK industrial production unexpectedly declined 0.4% m/m in January, reversing a 0.5% m/m advance in December, according to data from the Office for National Statistics. January IP fell 1.5% y/y, following a revised 3.7% y/y December decrease.
3/10	9:30am	NIESR GDP Estimate	0.3%		0.4%
		For February Provided by: National Institute of Economic and Social Research Official Release: PDF From the Release: "Our monthly estimates of GDP suggest that output grew by 0.3 per cent in the three months ending in February, following on from a growth of 0.6 per cent in the three months ending in January. The figure for the three months to January reflects a comparison of the period November 2009 to January 2010 with August to October 2009. The economy was extremely weak between August and October and the January figure is therefore high despite the fact that, in the month of January output was lower than it had been in November and December. We consider that the estimate of the growth rate in the three months ending in February 2010, as compared with the period September to November 2009 offers a better indication of the underlying current progress of the economy. As figure 1 shows, we now estimate that output is 0.7 per cent higher than at the trough of the depression which we currently place in September 2009."

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Central Bank Watch - Latest Bank of England Decision

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Central Bank Watch - Bank Officals' Comments

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November 29 (BOE Governor King) -- Bank of England Governor Mervyn King said today the central bank will offer financial institutions emergency funds to prevent a renewed increase in money-market interest rates from hurting economic growth.

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Economic and Financial Profile

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Credit Crunch Hits UK Economy:

The UK economy saw strong growth recently, and some inflation, prompting the central bank to raise rates from 4.5% to 5.75% from July of 2006 to July 2007. Unemployment is at record lows and the services sector is growing rapidly. The bank was projecting that growth would moderate nicely in 2008, letting the bank raise its rate again in early 2008. Then, on August 9th, the world's financial markets experienced a shortage of credit causing injection of funds into the system. The Bank of England did not intervene until Northern Rock, needed to be bailed out. Other economic news related to losses as a result of the credit crisis have turned the central bank dovish and in their Nov. 14th Inflation Report, it signaled that rates would come down to 5.25% next year.

With the onset of the credit crunch, the housing sector, which had been a strong vehicle of growth in the UK, has begun to wobble. Prices have been falling in several indicators, and higher costs for loans will shrink the potential buyers. Business investment may also take a hit. The UK economy is set to report 2% growth next year after a 3.5% measure projected for 2007.

Carry Trade:

The Pound is used as a destination for carry trade, as its higher yields attract investments which are funded though borrowing money in low interest rate currencies such as the Yen and Swiss Franc. When global stocks are doing well, traders buy the GBP/JPY, when global stocks fall, so does the GBP/JPY. The last two years saw a strong climb of about 52 yen, however Augusts' turmoil in financial markets sent the pair reeling. More recent financial news in November have prompted a second, or third (if you count early '07) round of Pound selling.

This figure is a weekly chart, of the GBP/JPY pair. Prices moving upward favor the strength of the Pound (the top currency in the GBP/JPY quote). When prices move down they favor the Yen (the bottom currency in the pair).