Classifieds | Archives | Jobs | About TGT | Contact | Subscribe
 | 
Last updated 56 minutes ago
Printer Friendly Version | TGT@Twitter | RSS Feed |
HOME LOCAL MIDEAST ASIA WORLD BUSINESS SPORT OPINION WRITERS
Britain’s economic expansion
February 10, 2018
 Print    Send to Friend

LONDON: British industry suffered its biggest fall since 2012 in December due to the temporary shutdown of a major oil pipeline, but growth in manufacturing confirmed the broader picture of solid economic expansion at the end of 2017. Construction also showed a surprise surge in December, according to official data published on Friday.

Britain’s economic growth slowed slightly in 2017 as higher inflation caused by the fall in sterling after the Brexit vote hurt consumers, but some exporters have gained from the weaker pound and the stronger global economy. Industrial output fell by 1.3 per cent month-on-month in December, the biggest drop since September 2012 after a 0.3 per cent rise in November, the Office for National Statistics (ONS) said.

Economists taking part in a Reuters poll had expected to see output fall 0.9 per cent as a shutdown in the damaged Forties North Sea oil pipeline looked certain drag on the sector. While Friday’s figures showed the hit was bigger than thought, the pipeline is back online so a rebound in production looks likely in January. Overall, the data are unlikely to alter the analysis of Bank of England officials who on Thursday upgraded their growth forecasts for Britain on account of an improving global economy, and said interest rates were likely to need to rise sooner than it had thought last year. Sterling and British government bonds showed little reaction to the data, but the pound later hit a three-week low against the US dollar after the European Union’s Brexit negotiator warned Britain that a transition period was “not a given”.

The ONS said Britain’s manufacturing sector, which is part of overall industrial output, saw output rise by 0.3 per cent on the month, marking the eighth consecutive month of growth in the sector - the longest such run in nearly 30 years. “Taken as a whole, we believe that today’s release remains consistent with the Bank of England gradually tightening monetary policy over the next two years,” said Investec economist George Brown. Britain’s economy grew at a quarterly rate of 0.5 per cent in the three months to December, the fastest pace seen over 2017. The ONS said the industrial and construction data did not alter this estimate. The economy continued to expand at this pace in the three months to January, the National Institute of Economic and Social Research estimated on Friday.

The buoyant world economy has been a boon for British exporters, who are in the midst of a sweet spot before Britain’s exit from the European Union, BoE Governor Mark Carney said on Thursday. Deputy Governor Ben Broadbent said on Friday that he would not be shocked if British interest rates needed to go up twice this year. However, ONS data showed Britain’s goods trade deficit with the rest of the world widened to 13.6 billion pounds ($18.8 billion) in December. Economists polled by Reuters had expected a smaller shortfall of 11.6 billion pounds.

 The ONS linked the large deficit to rising crude oil prices and higher imports. For 2017 as a whole, the total trade deficit including services narrowed by 7 billion pounds to 33.6 billion pounds. British trade minister Liam Fox said the figures showed demand for British goods and services was higher than ever. Separately, the ONS said construction output jumped 1.6 per cent on the month, helped by an upturn in infrastructure projects. The Reuters poll suggested construction output would be flat.

The Bank of England froze on Thursday its key interest rate at 0.5 per cent but cautioned that it could rise more quickly than expected to help bring down inflation.

The BoE also ramped up its outlook for the British economy, despite persistent uncertainty surrounding Brexit.

The central bank’s nine-strong monetary policy committee “voted unanimously to maintain bank rate at 0.5 percent”, it said in a statement, but warned that borrowing costs could rise sooner than expected “in order to return inflation suitably to target”.

“Monetary Policy would need to be tightened somewhat earlier and by a somewhat greater degree over the forecast period than anticipated,” it added.

In reaction, the pound surged against the euro and dollar on the prospect of a potential rate hike as soon as May, according to analysts, and further rises thereafter.

Global stock markets have meanwhile tanked this week on fears that the US Federal Reserve would also ramp up interest rates more quickly than expected following bright jobs data.

“Monetary policy for major central banks are slowly but surely moving towards normalisation,” NFS Micro analyst Nick Stamenkovic told AFP.

Agencies

Add this page to your favorite Social Bookmarking websites
Comments
 
Post a comment
 
Name:
Country:
City:
Email:
Comment:
 
    
    
FRONTPAGE
 
GALLERY
 
PANORAMA
 
TIME OUT
 
SPORT
 
 
Advertise | Copyright