This morning, we woke up and saw that UK’s economic growth showcased a slowdown in its third quarter. If we rewind back to the first half of 2024, with Q1 producing the strongest figures of 0.7% growth, followed by Q2 of 0.5%. Unfortunately for the UK economy we have seen a rapid pullback to 0.1% in Q3. Alarmingly September on it’s own retreated in economic output and we saw it contracting by -0.1%. So what’s the reasons for UK’s economy deteriorating its economic growth?
There is a number of factors that’s playing part in the performance. Firstly, leading up to the autumn budget, UK business confidence fell drastically to its lowest point since the election. Concerns from business owners of changes in fiscal policies – taxes, held business on their backfoot to first see what this would mean. Now that we know of the outcome with higher national insurance and a higher minimum wage – it reduces productivity due to some businesses are forced to reduce staff numbers. Interestingly we also heard from Bank of England governor Andrew Bailey mentioning that he would not involve himself with politics and after said that he don’t have an opinion on Brexit but its has left its consequences on trade flow.
Looking into the different sectors lack of performance leading to GDP figures fall for September, we can see that the production sector took the largest hit, contracting by 0.5%. Summarising that lack of confidence but especially a slow down in trade flow led to this – with UK being a servicing sector, meaning that we import most goods whether its fully produced or half fabricated to then be finalised through UK production and manufacturing.
This afternoon we do have US retail sales being released. It is expected to decrease slightly month-on-month from 0.4% to 0.3%. Since the election, USD has outperformed both GBP and EUR and even if retail sales are expected to decrease slightly – the overall outlook for the US economy and retail sales have been reinstated confidence with the chances that will take place in January. So even if we would see a small decrease the overall impact on the markets should not cause much volatility. Main data to keep an eye on when it comes to the US right now is job figures, that we will see be released in the middle of next week.
GBP/EUR 1.1967 GBP/USD 1.2653 GBP/AED 4.6506
GBP/AUD 1.9559 GBP/CHF 1.1233 GBP/CAD 1.7780
GBP/NZD 2.1553 EUR/USD 1.0562 GBP/ZAR 23.0114