Indicator Digest - CMS Forex

Gross Domestic Product

GDP is the broadest measures of the economy, encompassing every sector of the economy, such as consumer spending, business and residential investment. Increased growth relates to better corporate profits, stock growth, and eventually wages.

Main Indicator: Gross Domestic Product q/q

Most Recent Release

April
25th, 2008

Actual

Forecast

Revised Form

0.4%

0.6%

N/A

Preliminary Release for 1st Quarter
Release from Office of National Statistics

GDP y/y: 2.5%, forecast 2.6%, pr. 2.8%

GDP in the UK grew 0.4% in the 1st quarter, which met the consensus forecast and was the weakest growth since the 1st quarter of 2005. On the year growth was 2.5%, lower than expected. Financial institutions are feeling the effects of tighter credit conditions and massive writedowns, and many banks are limiting the amount they are lending, especially for mortgages. This has sized up the housing market, which has seen prices sinking, and caused the Bank of England to intervene and offer a plan to swap £50 billion in government bonds for mortgage-backed securities to help financial institutions fund their business.

Higher inflation and declining property values will work to limit consumer spending, even as employment seems to be holding up. UK consumers have racked up a record debt of £1.4 trillion which will also impact domestic demand. The central bank is at odds at what to do the latest minutes showed. Some policy members believe that the Bank should focus on inflation while one member voted for a 50 basis point cut in the last meeting. The Bank has lowered rates 3 times since December and if the economy continues to slow, will have to move to cut rates further.

Despite the data, the Pound improved overnight, jumping against the Dollar and Yen. The GBP/USD set a session low near 1.9676 in the hour following the release, but recovered and climbed 180 pips from there.

Next Release Date: May 23rd 2008, 4:30 EST

Table of Past Data

	6/29	7/20	9/26	10/19	11/23	12/20	1/23	2/27	3/28	4/25

Actual	+0.7%	+0.8%	0.8%	0.8%	0.7%	0.7%	0.6%	0.6%	0.6%	0.4%
Forecast	+0.7%	+0.7%	0.8%	0.7%	0.8%	0.7%	0.5%	0.6%	0.6%	0.4%
Previous	+0.7%	+0.7%	0.8%	0.8%	0.8%	0.7%	0.7%	0.6%	0.6%	0.6%
Revised From	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A

Secondary Indicator: NIESR GDP Estimate

Most Recent Release

May
7th, 2008

Actual

Forecast

Revised Form

0.4%

0.5%

For April

Table of Past Data

	9/6	10/8	11/5	12/6	2/7	3/10	4/9	5/7

Actual	0.7%	0.7%	0.7%	0.6%	0.5%	0.5%	0.5%	0.4%
Forecast
Previous	0.8%	0.7%	0.7%	0.7%	0.5%	0.5%	0.6%	0.4%
Revised From	N/A	N/A	N/A	N/A	N/A	N/A	0.5%	0.5%

Past Releases

NIESR GDP Estimate

April
9th, 2008

Actual

Forecast

Revised Form

0.5%

0.6%

0.5%

For March

Gross Domestic Product q/q

March
28th, 2008

Actual

Forecast

Revised Form

0.6%

N/A

Final Version for 4th Quarter
Release from Office of National Statistics

GDP y/y (4Q F): 2.8%, forecast 2.9%, pr 2.9%

Pre-Release: The revised version of 4th quarter GDP on Feb 27th, showed no change from the preliminary release, and it is unlikey the final version will hold any big surprises.

Post-Release: The growth trend in Q4 started to head south. Recession talks are getting louder, and the BoE is now expected to cut rates in April. The resilient PMIs that came out of the UK and the Eurozone gave hope to some that these regions will be able to avoid the contagion of global slowdown. However, today's record low consumer confidence and house price data is bringing people back to the "recession-expecting" camp. This is reflected in the Pound's weakness as it traded lower against Euro and the Greenback after today's releases.

NIESR GDP Estimate

March
10th, 2008

Actual

Forecast

Revised Form

0.5%

N/A

Gross Domestic Product q/q

February
27th, 2008

Actual

Forecast

Revised Form

0.6%

N/A

Revised Version for 4th Quarter
Release from Office of National Statistics

GDP y/y: 2.9%, forecast 2.9%, pr. 2.9% (4Q prel)

Private Consumption: 0.2%, forecast 0.6%, pr. 1.1%
Government Spending: 0.9%, forecast 0.6%, pr. 0.3%
Gross Fixed Capital Formation: -0.5%, forecast 0.7%, pr. 2.4%
Exports: -0.5%, forecast 0.4%, pr. 2.0%
Imports: -1.2%, forecast -0.1%, pr. 4.7%

The revised version of UK GDP did not change from its initial release. The 0.6% increase from the 3rd quarter is the slowest pace in more than a year. A major contributor to slower growth in the 4th quarter was a reduction in consumer spending (0.2%). Investment (-0.5%) declined, undershooting economists expectations. Bank of England Governor Mervyn King has stated this month that the economy will slow in 2008, and that as a result of higher inflation, being driven by record energy costs, the central bank may not be able to cut rates much further. The bank has lowered rates twice in the last three months.

"GDP grew by 0.6 per cent in the fourth quarter of 2007. This compares to 0.7 per cent in the previous quarter. The level of GDP is now 2.9 per cent higher than the fourth quarter of 2006. For the year 2007 as a whole GDP rose by 3.1 per cent over 2006, up from 2.9 per cent in the previous year."

NIESR GDP Estimate

February
7th, 2008

Actual

Forecast

Revised Form

0.5%

N/A

Gross Domestic Product q/q

January
23rd, 2008

Actual

Forecast

Revised Form

0.6%

0.5%

0.7%

N/A

Advance Estimate of 4th Quarter
Press Release from the Office of National Statistics

GDP y/y: 2.9%, forecast 2.8%, pr. 3.3%

GDP growth in the UK slowed to 0.6% in the 4th quarter, and down to 2.9% year-over-year. "A slight acceleration in production was more than offset by weaker growth in services." It was the lowest growth since the 3rd quarter of 2006. For 2007, as a whole, GDP was up 3.1%, though 2008 is predicted to slow to 1.8%, and therefore this information is lagging current conditions.

The next interest rate decision for the Bank of England comes on February 7th, and is expected to be a 25 basis point rate cut in order to shore up slower growth.

Gross Domestic Product q/q

December
20th, 2007

Actual

Forecast

Revised Form

0.7%

N/A

Final Version for 3rd Quarter
y/y 3.3%
Release from Office of National Statistics: GDP Growth

Output industries were flat due to weakness in mining and quarrying. Services industry picked up the slack growing 0.8% in Q3. This was driven by the business and financial services sector.

NIESR GDP Estimate

December
6th, 2007

Actual

Forecast

Revised Form

0.6%

0.7%

N/A

For November.

Gross Domestic Product q/q

November
23rd, 2007

Actual

Forecast

Revised Form

0.7%

0.8%

N/A

Final Release for 3rd Quarter.
Office of National Statistics

GDP y/y: 3.2% (3rd Q), forecast 3.3%, pr. 3.3% (2nd Q)

NIESR GDP Estimate

November
5th, 2007

Actual

Forecast

Revised Form

0.7%

N/A

For October.
(National Institute of Economic and Social Research based in London)

Gross Domestic Product q/q

October
19th, 2007

Actual

Forecast

Revised Form

0.8%

0.7%

0.8%

N/A

3rd Quarter advance release
Annaul basis: 3.3%

UK's economy is showing up economist expectations and is reducing many theories that an easing was due after this past year's rate hikes.

ONS estimated an unchanged rate of growth for Q3 compared to Q2. Slight expansion in total services was countered by deceleration in production.

Manufacturing slowed a bit to contribute to a slower overall industrial output growth level which eased to 0.2% from 0.7%. Total services accelerated slightly, to 1.0% from 0.9% as strong retail sales kept the economy buoyed. Government and other services showed zero growth after a rise of 0.1% in Q2. Construction expanded at 0.8%, reaching the same level as it did in Q2. Agriculture fell to 0.7% from 0.2%.

NIESR GDP Estimate

October
8th, 2007

Actual

Forecast

Revised Form

0.7%

N/A

Gross Domestic Product q/q

September
26th, 2007

Actual

Forecast

Revised Form

0.8%

N/A

Final revised version of 2nd Quarter GDP.

GDP y/y: 3.1, forecast 3.0%, prev. 3.0%

Capsule Notes from preliminary release on 7/20:
"According to the Office of National Statistics, growth appeared to be healthier in the 2nd quarter of 2007. Production output rose by 0.6% after a 0.1% drop. This was driven by stronger manufacturing which also rebounded from a fall of 0.4% to a rise of 0.6% this quarter. Construction also accelerated, with a rise of 1.1% compared to previous quarter's 0.7%. These gains offset the weakness from total services, which decelerated to 0.8% growth from 0.9% in the 1st quarter. In the UK, services are still a main driver of the GDP."

NIESR GDP Estimate

September
6th, 2007

Actual

Forecast

Revised Form

0.7%

0.8%

N/A

The estimate by the National Institute of Economic and Social Research in London suggested that although there is a slight slowdown in the 3 month quarter to August as compared to July, there is no reason to expect significant impact from the recent credit crunch.

Gross Domestic Product q/q

July
20th, 2007

Actual

Forecast

Revised Form

+0.8%

+0.7%

N/A

(p)According to the Office of National Statistics, growth appeared to be healthier in the 2nd quarter of 2007. Production output rose by 0.6% after a 0.1% drop. This was driven by stronger manufacturing which also rebounded from a fall of 0.4% to a rise of 0.6% this quarter. Construction also accelerated, with a rise of 1.1% compared to previous quarter's 0.7%. These gains offset the weakness from total services, which decelerated to 0.8% growth from 0.9% in the 1st quarter. In the UK, services are still a main driver of the GDP.

Gross Domestic Product q/q

June
29th, 2007

Actual

Forecast

Revised Form

+0.7%

N/A

Annually, the UK economy grew at 3.0%. Services sector grew 0.9% in the first quarter of 2007. The ONS noted reduction in employers' special contribution payment into pension funds, a rise in tax and interest payments, and increased consumption expenditure.