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9 February 2018
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| Britain economy (The Total Investment & Insurance Solutions) |
A day after the Bank of England hinted that it could raise interest
rates faster than many expected, a run of economic figures on Friday suggest
the British economy did not end 2017 as strongly as previously thought.
Official figures showed a 1.3 percent monthly decline in industrial
production in December and a 4.9 billion-pound ($6.9 billion) trade deficit for
goods and services, its worst since September 2016. Though construction output
was stronger than anticipated, expanding by 1.6 percent during the month, some
economists say that the figures could lead to economic growth being revised
down. The Total
Investment & Insurance Solutions
"Today's data reinforces the message that the U.K. continues to
underperform other developed market economies, growing at around half the rate
of the U.S. and the eurozone," said James Knightley, chief international
economist at ING.
"As such, while the Bank of England is clearly hinting at the
potential for a May rate hike, we remain cautious on the longer term path for
rates, particularly given the Brexit-related uncertainty." The Total Investment & Insurance
Solutions
Last month, the Office for National Statistics estimated that the
economy grew 0.5 percent in the fourth quarter from the previous three-month
period, a better-than-expected outturn that partly allowed the Bank of England
on Thursday to talk up the chance of more rate increases.
Investors moved swiftly to price in a growing likelihood of a quarter-point
interest rate hike in May to 0.75 percent, which would be the bank's second
increase in six months. With unemployment at multi-decade lows and the global
economy growing strongly, policymakers at the central bank are concerned that
inflation is building. The Bank of England is tasked with setting rates to keep
inflation near 2 percent. In December, it stood at 3 percent.
Even if fourth-quarter growth is not downgraded when the next estimate
is published later this month, the trade figures are likely to provide
rate-setters on the Bank's Monetary Policy Committee with pause for thought.
Governor Mark Carney had said exporters were in a "sweet spot" at the
moment — still in the European Union ahead of Brexit but also benefiting from the
fall in the pound after Britain voted to leave the EU. The Total Investment & Insurance
Solutions
"The latest trade figures should temper the MPC's optimism that the
economy is rebalancing and enjoying a trade boost," said Samuel Tombs,
chief U.K. economist at Pantheon Macroeconomics.The Total Investment & Insurance Solutions
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