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UK economy suffers weakest six months since 2011

September 29, 2018

UK economy has suffered its weakest six-month growth period since 2011, as the figure for the first quarter was revised lower.

While the second reading for gross domestic product (GDP) confirmed initial estimates of 0.4% for the second quarter, the Office for National Statistics (ONS) said growth was weaker in the first three months of the year.

It has revised GDP down from 0.2% to 0.1% for the period from January to March this year – a period that saw the country hit by extreme wintry weather brought in by the Beast from the East. The 0.4% estimate for second quarter GDP was in line with economist estimates.

The pound was mixed on the release, trading higher by 0.1% against the euro at 1.124, but down 0.15% versus the US dollar at 1.305. The downward revision to first quarter growth was a result of updated construction estimates, which the ONS said was due to more comprehensive administrative data replacing surveys covering the industry.

It means construction output for the first quarter fell by 1.6%, the weakest quarterly growth since 2012. “There is an underlying trend of slowing real GDP growth, as the UK economy grew by 0.5% in the first half of 2018 compared with the second half of 2017,” the ONS report said. “This marks the weakest six-monthly growth since the second half of 2011”.

However, construction bounced back in the second quarter, with more favourable weather helping output grow 0.8%. Manufacturing fell by 0.7% between April and June. It marked the second consecutive quarterly fall, reflecting an “easing” in manufacturing export growth. Economic growth in the second quarter was supported by the UK’s powerhouse services sector, which grew 0.6% compared to subdued growth of just 0.3% in the first three months of the year.

It was helped by a rebound in retail sales, having been affected by adverse weather in the first quarter. But spending was fuelled by debt, according to ONS data, which showed households continued to be net borrowers in the second quarter.

Related: Chancellor says no deal Brexit will damage UK GDP for years to come

It was the seventh consecutive quarter in which households had to borrow or dip into savings to finance their spending and investment. “The households’ saving-ratio remains low by historical standards at 3.9%,” the ONS said.

Commenting on the data, the statistics agency’s head of national accounts Rob Kent-Smith said: “Although it has picked up a little from a slow start to the year, underlying economic growth remains persistently below the long-term average.

“The latest business investment data shows growth weakening for the fourth quarter in a row while households have spent more than they earned for seven consecutive quarters. “Meanwhile our deficit with the rest of the world has grown, with goods imports increasing and overseas income falling.”

Figures showed the UK’s current account deficit widening to 3.9% in the second quarter, due in part to the trading in “erratic goods” like gold and aircraft which the ONS said can be volatile and not necessarily representative of the underlying trend.

Business investment fell by 0.7% between April and June, with external surveys having suggested that Brexit uncertainties have been taking their toll. Howard Archer, chief economic adviser to the EY ITEM Club, said: “While GDP growth recovered in the second quarter, the growth mix was not particularly appetising on the expenditure side of the UK economy with business investment falling and net trade sharply negative.”

“Despite the recent improved performance of the UK economy and a pick-up in consumer price inflation to a 6-month high of 2.7% in August, we expect the Bank of England to hold fire on further interest rate hikes until after the UK leaves the EU in March 2019 given the major uncertainties that are occurring in the run-up to the UK’s departure.”

Source: Scotsman

Brexit estimated to cost UK more than 2% of GDP

September 8, 2018

Gross Domestic Product (GDP) has been found to be 2.1% lower than it would have been had Brexit not happened, according to a UBS report released on Monday.

The research suggests that if the UK had not voted to leave the European Union, investment would have been at 4% higher and inflation 1.5% lower.

The report also revealed that consumption is 1.7 percent lower and the real effective exchange rate (REER) has depreciated by 12 percent.

Economists at UBS measured how much Brexit has cost the UK so far by analysing and comparing to what the GDP would have looked like now had Remain won the vote in 2016.

According the report, “without Brexit we think UK GDP could have been 100 basis points per year higher.”

What does this mean for accountancy?

Negotiations between the UK and EU seem to be worsening with the UK government failing to come to agreements on the type of Brexit they want next March.

In fact, progress is so slow that HMRC released a report last month detailing the VAT implications of a ‘no deal’ Brexit, informing the public that while they still thought it unlikely, they must prepare for the scenario that no agreement is reached.

Related: Chancellor says no deal Brexit will damage UK GDP for years to come

The EU’s chief negotiator, Michael Barnier, rejected Theresa May’s Chequers plan which envisioned the country abiding by a common rulebook for goods but not services.

This uncertainty does not help the UK’s future growth forecasting. The International Monetary Fund lowered its UK GDP growth forecast for 2018 recently, now predicting a 1.4 percent growth compared with 1.6 percent in April.

Despite the concern, the UK economy grew by 0.4 percent in the second quarter from the first quarter, which was the same growth as the Eurozone.

UBS economists added that while there have been some negatives surrounding Brexit, like unemployment dropping to its lowest level since 1974 (four percent), wage growth is increasing and gross fixed capital formation has improved in the second quarter of this year.

Uncertainty is the main pain point for accountants when it comes to Brexit. There is uncertainty around how Brexit will impact tax, accounting standards, the accounting jobs market, and so on.

There is no escaping the confusion as we muddle close towards 29 March 2019. All accountants can do is stay up to date with Brexit-related changes and help their clients prepare for all eventualities.

Source: Accountancy Age

Chancellor says no deal Brexit will damage UK GDP for years to come

August 27, 2018

Chancellor Philip Hammond has outraged pro-Brexit Conservative MPs by warning that the UK may have to increase its borrowing by £80bn a year by 2033/34 in the event of a no-deal Brexit.

They have accused him of scare-mongering about the impact of leaving the EU on World Trade Organisation (WTO) terms rather than with a negotiated withdrawal agreement, and poured scorn on the Treasury’s analysis he has based his estimates on.

Yeovil MP Marcus Fysh tweeted that it was time to rev up his “take down of the Treasury’s incredibly dubious Brexit forecasts, since the chancellor seems determined to wheel them out again for yet another instalment of dodgy project fear”.

Meanwhile, Jacob Rees-Mogg, MP for North East Somerset and chairman of the European Research Group, told the BBC’s Newsnight last night that “the Treasury’s Brexit panic means you can no longer trust the Treasury’s forecast”.

Related: What impact is Brexit uncertainty having on the UK economy?

Hammond’s warning is contained in a letter he sent yesterday to Nicky Morgan, chair of the Treasury Select Committee.

In it he reiterates the findings of a cross-Whitehall briefing, published in January, which estimated that a no-deal/WTO Brexit would have an adverse impact on GDP over a 15-year period, reducing it by 7.7%.

He adds that additional analysis has indicated that chemicals, food and drink, clothing, manufacturing, cars and retail would be negatively affected in the long run, “with the largest negative impacts felt in the north east and Northern Ireland”.

“GDP impacts of this magnitude, were they to arise, would have large fiscal consequences,” he writes.

“The January analysis estimated that borrowing would be around £80bn a year higher under a no deal/WTO scenario by 2033-34, in the absence of mitigating adjustments to spending and/or taxation, relative to a status quo baseline. This is because any direct financial savings are outweighed by the indirect fiscal consequences of a smaller economy.”

Hammond says the analysis is currently being refined but he expects it to show that there will be a more damaging effect on the economy and public finances where there are higher barriers to trade with the EU. “These are conclusions that many other credible external organisations have come to independently, including the IMF, the OECD, the LSE and NIESR,” he adds.

In the letter, he gives his backing to the July White Paper – the Chequers agreement – and suggests that the economic and fiscal impacts of its proposals will be significantly better than no deal, “protecting jobs and livelihoods and supporting the UK and EU’s commitment to no hard border between Northern Ireland and Ireland”.

Earlier this week, Rees-Mogg wrote to Conservative associations urging them to reject the Chequers agreement which he believes would “shackle [the UK] to the EU forever”.

“We would be out of Europe yet still run by Europe,” the letter said. “This is why the prime minister should ‘chuck Chequers’ and instead seek a Canada-style free trade agreement with the EU to make the most of the global opportunities that lie ahead.”

He added that it was time the government realised that the EU stands to lose much from a no-deal Brexit and “stopped being cowed by the EU’s threats”.

Source: Economia

Is UK economic growth higher than in Europe?

August 24, 2018

Claim: UK economic growth in the second quarter of 2018 was 0.4%. In the Eurozone it was 0.3%.

Conclusion

This was correct when the claim was made earlier in August, but the figures have since been revised, with both the UK and Eurozone growing at 0.4% in the second quarter. Growth in the EU and the Eurozone is higher in the previous 12 months than the UK. It’s projected to stay that way.

“UK economic growth in the second quarter of 2018: United Kingdom: +0.4% Eurozone: +0.3%”

Twitter user, 10 August 2018

When this claim was made earlier in August, it was correct that in the second quarter of 2018, the UK’s Gross Domestic Product (GDP) grew by 0.4% and the Eurozone’s grew by 0.3%. The Eurozone figure has since been revised to 0.4%, the same as the UK.

In the longer term, UK economic growth is below growth in the Eurozone.

The Eurozone is made up of those countries that use the Euro, and isn’t the same as the European Union as a whole (which includes countries like Poland and the UK which don’t use the Euro).

Related: Chancellor says no deal Brexit will damage UK GDP for years to come

The EU’s growth last quarter was, like the UK’s, 0.4%. Its growth was still the same even if you remove the UK from the calculation.

growth

Referring to the UK’s performance the Office for National Statistics said: “The economy picked up a little in the second quarter with both retail sales and construction helped by the good weather and rebounding from the effects of the snow earlier in the year.”

GDP is the main measure of the size of a country’s economy. It can be measured in different ways, one of which is adding up the value of all goods and services produced in a country.

What’s happened over the longer term?

Looking at a single quarter’s growth figures in isolation won’t give you the big picture. Quarterly GDP growth has been higher in the EU and Eurozone since the last quarter of 2016.

GDP growth in the Eurozone and wider EU is forecasted to be higher than in the UK in 2018 and 2019.

growth

Source: Full Fact

No-deal Brexit would cost European Union 1.5 percent of GDP: IMF

July 21, 2018

European Union countries will suffer long-term damage equivalent to about 1.5 percent of annual economic output in case of a no deal Brexit.

Britain is due to leave the EU on March 29 next year, and Prime Minister Theresa May has yet to reach a consensus within her own Conservative Party on what future ties with the EU should look like, let alone broker a final deal with the EU.

The EU’s lost economic output in the case of no deal would cost the bloc around $250 billion, according to Reuters calculations based on the IMF’s estimate of the size of the EU economy excluding Britain this year.

Lost employment could total 0.7 percent of the EU workforce, or more than a million jobs.

The timing of the losses would depend on the length of post-Brexit transition arrangements, but would probably take five to 10 years at least to be fully felt, the IMF said.

While Britain and the EU agreed the outlines of a transition plan in March to largely preserve the status quo until the end of 2020, this deal has not been ratified and risks falling apart if there is no agreement on longer-term goals.

“The strength of the euro area-UK integration implies that there would be no Brexit winners,” the IMF said.

Ireland would be worst hit due to its close trade ties with Britain, followed by the Netherlands, Belgium and Luxembourg. Germany would also suffer due to industrial supply chains.

Looking at the trade impact alone, Ireland could lose almost 4 percent of its economy in a no deal Brexit, but some big countries like France, Italy and Spain would be far less hurt.

Britain has argued it is in the EU’s economic interest to take a flexible approach to Brexit, while the EU is concerned not to set a precedent of allowing a country to leave but retain the aspects of EU membership it finds beneficial.

Some British lawmakers say the country should leave the EU and trade on World Trade Organization terms – the IMF’s no deal Brexit scenario – if the EU makes too few concessions.

The IMF said its study showed a bigger negative impact on the EU from Brexit than some previous work, because it modeled the disruption to manufacturing supply chains as well as the effect of tariffs and reduced financial services trade.

The Washington-based body also urged the EU to continue to allow London-based ‘central counterparties’ (CCPs) that clear global financial trades to handle euro transactions – something the European Central Bank has resisted previously.

Related: Chancellor says no deal Brexit will damage UK GDP for years to come

“The potential forced relocation of a globally systemically important CCP to the EU should be viewed with great hesitation,” the IMF said.

The economic damage from Brexit would be minimal if Britain were to adopt the ‘soft Brexit’ Norwegian-style model of being part of the European Economic Area, which May has rejected as it would largely require Britain to stick to EU rules.

A free trade agreement for manufactured goods – which is closer to what May is seeking – would reduce long-term EU losses to 0.8 percent of GDP, or around $130 billion.

The IMF did not estimate the costs of no deal Brexit for Britain in this paper, which accompanies a two-yearly assessment of the EU, though earlier this week it downgraded its forecast for British growth this year to the weakest since 2012.

Before Britain voted to leave the EU, the IMF warned of a possible recession under an ‘adverse’ scenario, drawing criticism from Brexit supporters.

Earlier this year Bank of England Governor Mark Carney said Britain’s economy was around 1.5-2.0 percent smaller than it would have been if the public had voted to stay in the EU – not far from what the IMF forecast for a ‘limited’ Brexit scenario.

Source: UK Reuters

UK economy boosted by warm weather and royal wedding in May

July 12, 2018

UK economy boosted by warm weather and royal wedding in May. The UK economy benefited from a retail rebound in May as the sector received a “double boost” from warm weather and the royal wedding.

The Office for National Statistics (ONS) said the the uk economy expanded 0.3% in May, while gross domestic product (GDP) rose 0.2% over the three months to May.

Both of those figures were in line with economists’ expectations.

The ONS’ head of national accounts, Rob Kent-Smith, said it showed a “mixed picture of the UK economy with modest growth driven by the services sector, partly offset by falling construction and industrial output”.

He added: “Retailing, computer programming and legal services all performed strongly in the three months to May, while housebuilding and manufacturing both contracted.

Related: UK economy suffers weakest six months since 2011

“Services, in particular, grew robustly in May with retailers enjoying a double boost from the warm weather and the royal wedding.

“Construction also saw a return to growth after a weak couple of months.”

The pound lost ground on the news to trade flat against the US dollar at 1.325.

Versus the euro, sterling was up 0.2% at 1.129.

The readings are the first in the new set of rolling estimates of GDP by the statistic agency, which previously provided only quarterly estimates of growth.

The ONS figures show that in the three months to May, services output increased by 0.4% compared with the three months ending February.

Month on month, services rose 0.3%, with wholesale, retail and motor trade making the largest contribution.

But construction output continued its recent decline on a three-monthly basis, falling by 1.7% in May, its third consecutive decrease.

This was driven by a fall in new work, which also fell for the third consecutive month, decreasing by 2.5%.

However, the ONS said that month on month, construction output showed signs of recovery in May, rising by 2.9% compared with April.

The sector was helped by private housing repair and maintenance work, which grew 7.3% in May following a weak start to the year.

PwC chief economist John Hawksworth said the recent rebound in services and construction output could result in a near doubling of growth in the second quarter, putting the Bank of England’s Monetary Policy Committee (MPC) on track to raise interest rates next month.

“We estimate that growth in the second quarter will end up at around 0.4%, given signs from business surveys of continued forward momentum in services and construction in June,” he said.

“This pick-up in growth could be enough to tip the majority of the MPC towards a rate rise in August, though this is not yet a done deal given continuing uncertainties over Brexit and rising global trade tensions.”

Bank of England Governor Mark Carney last week highlighted that a recent revision to the first quarter growth rate from 0.1% to 0.2% confirmed his view of the UK’s positive growth trajectory.

He said the incoming data gave him “greater confidence” that softer UK activity in the first three months of the year was “largely due to the weather, not the economic climate”.

The Bank is widely expected to raise interest rates from 0.5% to 0.75% in August.

The ONS’ data dump also showed that in the three months to May, production fell by 0.6% compared with the three months to February, due to a 1.2% contraction in manufacturing.

Month on month, total production decreased by 0.4% in May, led by falls in energy supply of 3.2% and mining and quarrying of 4.6%.

Manufacturing output increased 0.4% month on month. In the three months to May, production increased by 1.8% compared with the same three months to May 2017.

The total UK trade deficit widened £5 billion to £8.3 billion in the three months to May, mainly due to falling goods exports and rising goods imports.

Falling exports of cars and rising goods imports were mostly responsible for the widening.

The UK imported 55% of its goods from the EU and exported 51% of its goods to countries outside of the EU in the 12 months to May 2018, the ONS said.

Source: iTV

Where next for the UK economy and sterling?

June 8, 2018

It is hard to avoid the impression that the UK economy is continuing to show elements of weakness. Even the latest services purchasing managers index (PMI), which rebounded to 54 in May (a three-month high), is still weaker than the previous peaks of February 2018 and October 2017. This creates what would be known in technical analysis as a ‘lower high’, usually a negative sign. Indeed, the component parts of the index provided little room for cheer, as new business volume grew at a weak rate and employment growth posted the second weakest reading since March 2017.

Speaking of March 2017, UK inflation fell back in April 2018 to 2.4% year-on-year, the lowest reading since the third month of 2017. A further worrying sign was the weakness in the core consumer price index (CPI) reading, which strips out the more volatile food and energy readings. This fell to 2.1% for April, from 2.3% in March, and is also the lowest reading since March 2017.

CPI chart

Gross domestic product (GDP) readings provide little comfort either. UK growth has been on a steady downward track since the first quarter (Q1) of 2017, falling from 2.1% year-on-year to 1.2% for the first three months of 2018. Quarter-on-quarter, the growth rate was just 0.1%, the lowest since the 0.1% contraction in growth in the final quarter of 2012.

GDP chart

So what’s the good news, if there is any? Well, the Bank of England (BoE) will be pleased that the pound has dropped sharply against the US dollar. A fall in the currency is equivalent to a cut in interest rates, which will likely result in higher inflation. Imports rise in the price, while exports will become more competitive, helping to boost economic growth. While the BoE continues to proclaim its commitment to higher rates, using the word ‘soon’ to describe the timetable for rate rises, there is still little real sign that the Monetary Policy Committee (MPC) is particularly keen on the idea, preferring to talk about it rather than actually do anything.

Plus, the UK appears to be heading for the softest of soft Brexits, as the Eurosceptics lose control of the process and allow the Prime Minister to steer a middle course. While this might not be quite the idea of ‘taking back control’ that many Leavers had, an initial modest disengagement from Europe will preserve a significant amount of continuity, while still providing for a greater divergence in the much longer term.

Looking away from the UK for a moment, the weakness in eurozone economic data also provides some reason for caution. The ‘euroboom’ of 2017 has likely ended, although an immediate contraction in growth is unlikely. Being our closest trading partner, the eurozone’s weakness will be felt in UK activity too, so the growth figures may reflect this is due course.

One cause for concern remains higher petrol prices, which while not as high as late 2015 are still rising, with the weaker pound providing a further upward push. As some have noted, the BoE is reaping what it has sown, with its indecision on interest rate increases weakening sterling and putting a squeeze on consumer spending.

Petrol price chart

What does this mean for GBP/USD? The pair has fallen back sharply since mid-April, but this is within the context of a steady climb from the 2017 nadir below $1.20. A short-term rebound is entirely plausible, given how negative on the outlook investors have become since Mark Carney talked down the prospect of rate rises back in April. But with the dollar still strong, and months of Brexit negotiations ahead, the pair’s rebound could be short-lived.

GBP/USD chart
Source: IG

A guide to the top ten world economies

June 2, 2018

The world’s largest economies form the foundations of global growth and their importance cannot be understated. We have a look at the top ten economies in the world and what keeps them moving.

‘We are moving toward a global economy. One way of approaching that is to pull the covers over your head. Another is to say: it may be more complicated – but that’s the world I am going to live in, I might as well be good at it,’ – Philip Condit, former president, chief executive and chairman of Boeing.

Over two-thirds of the world economy is concentrated in just ten countries, making them key to international markets and global growth. The rapid development in emerging markets is hastily changing the landscape so that nations like China and India are overtaking the developed nations, such as the US and those in Europe, who have established themselves as integral cogs in the world engine.

Having compiled data from the International Monetary Fund (IMF), the World Bank, the Index of Economic Freedom, the Observatory of Economic Complexity and national databases, we have a look at the top ten economies:

What are the top ten economies in the world?

According to the IMF, the top ten world economies according to gross domestic product (GDP) at current prices in 2017 were as follows:

Economy 2017 GDP (trillions) % of world economy YoY output change
US
$19.39 24.3% 2.30%
China
$12.01 15% 6.90%
Japan
$4.87 6.1% 1.70%
Germany
$3.68 4.6% 2.50%
UK
$2.62 3.3% 1.80%
India
$2.61 3.3% 6.70%
France
$2.58 3.2% 1.80%
Brazil
$2.05 2.6% 1%
Italy
$1.94 2.4% 1.50%
Canada
$1.65 2.1% 3%
World
$79.87 100% 3.80%

(Source: International Monetary Fund, GDP based on current prices. Output change from ‘World Economic Outlook: Cyclical upswing, structural change’)

1. The US economy

Although the US economy is dominated by the services sector, accounting for about 80% of GDP, the country is still one of the biggest manufacturers in the world and known for expertise in medical, aerospace and military equipment. It is also one of the leaders when it comes to research and development.

Economic growth in the US has been steady in recent years, comfortably outperforming the UK and eurozone. Real estate, financial and insurance services, and health and social care are some of the country’s biggest industries.

An ever-strengthening jobs market has been at the heart of the Federal Reserve’s (Fed’s)debate over when to raise interest rates and, while wage growth has not been as strong, it is expected to pick up as more people become employed, tightening the availability of staff and hopefully pushing up wages.

The election of US President Donald Trump in late 2016 has seen the government focus on overhauling the tax system, cutting red tape and reviewing trade policies, particularly with its biggest trading partner China.

Population: 324 million

2017 GDP per capita (current prices): $59,500

Trade balance: ($1.38 trillion)

Top exports: Refined petroleum, cars, planes, helicopters/spacecraft, gas turbines

Top destinations for exports: Canada, Mexico, China

Top imports: Cars, crude petroleum, computers, packaged medicaments

Top origins of imports: China, Mexico, Canada

National currency: US dollar

Major stock exchanges: New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotation System (NASDAQ)

Major indices: S&P 500Dow JonesNASDAQ

2. China’s economy

China is the world’s factory and is by far the biggest manufacturer of goods. Manufacturing is at the heart of the economy, boosted by its role in the global supply chain, which sees it finish-off and export a swathe of partly-finished goods that are imported into the country, particularly from other Asian neighbours. China is expected to overtake the US as the world’s biggest economy as early as 2029.

Still, the behemoth’s agricultural sector is one of the biggest employers in the country. However, the country’s services industry is gradually growing as the country shifts away from producing cheap goods for the world.

Under President Xi Jinping, who has recently consolidated power in the country, China is moving from ‘Made in China’ to ‘Made by China’ by accelerating its technological abilities so it can compete with more advanced Western and Asian countries. While China is still very protective about allowing foreign firms entry into the country, they are increasingly opening up to the rest of the world and is investing in other countries in areas like Africa.

Read more about how a US-China trade war could impact markets

While growth still outshines the rest of the world, it has slowed in recent years, but data from China can still be regarded as unreliable.

Population: 1.4 billion

2017 GDP per capita (current prices): $8640

Trade balance: $1.88 trillion

Top exports: Computers, broadcasting equipment, telephones, integrated circuits

Top destinations for exports: US, Hong Kong, Japan

Top imports: Integrated circuits, crude petroleum, gold, iron ore, cars

Top origins of imports: Hong Kong, South Korea, US

National currency: Renminbi

Major stock exchanges: Shanghai Stock Exchange, Shenzhen Stock Exchange

Major indices: Shanghai Composite Index, Shenzhen Stock Exchange Component Index

3. Japan’s economy

Japan is regarded as the original high-tech economy and at the forefront of Asia until it was overtaken by China in 2010. Automobiles, electronic equipment, shipbuilding, pharmaceuticals and banking are all prominent industries in Japan.

Get the latest forex rates for USD/JPY and other currency pairs here

Many of Japan’s modern-day problems centre on demographics, with an aging population and low birth-rate holding back growth. Japanese Prime Minister Shinzo Abe has been in power since 2012 and has introduced ‘Abenomics’ to rejuvenate the economy through monetary easing, flexible fiscal policy and structural reform.

Population: 127 million

2017 GDP per capita (current prices): $38,440

Trade balance: $259 billion

Top exports: Cars, vehicle parts, integrated circuits, industrial printers

Top destinations for exports: US, China, South Korea

Top imports: Crude petroleum, petroleum gas, packaged medicaments, computers

Top origins of imports: China, US, South Korea

National currency: Yen

Major stock exchanges: Tokyo Stock Exchange

Major indices: Nikkei 225, Topix

4. Germany’s economy

Germany is the kingpin of the European Union, both politically and economically. The German economy is fuelled by exports of high-quality goods. The automotive industry is the engine of the country, followed by the manufacturing of machinery and chemicals.

Read more on how forex trading works

Although Chancellor Angela Merkel has remained the country’s long-standing figurehead, her position has been weakened since her party failed to secure a majority in the 2017 elections, leading to a coalition with the opposing Social Democrats.

Population: 82 million

2017 GDP per capita (current prices): $44,500

Trade balance: $494 billion

Top exports: Cars, vehicle parts, packaged medicaments, planes, helicopters/spacecraft

Top destinations for exports: US, France, UK

Top imports: Cars, vehicle parts, packaged medicaments, computers

Top origins of imports: Netherlands, France, Belgium

National currency: Euro

Major stock exchanges: Deutsche Börse

Major indices: DAX

5. The UK economy

The UK economy has proven more resilient than most expected following the EU Referendum vote in June 2016, but Brexit will continue to be the dominant feature of the country’s economy in both the short and medium term.

Read more on the potential economic impact of Brexit

The UK economy is heavily centred on services, accounting for about 80% of its entire economic output. This includes sectors like hospitality, distribution, transport, communication, and business services and finance (the latter of which has accounted for the bulk of growth in overall services output in recent decades). For context, manufacturing represents just 10% of total output while construction accounts for 6%.

Learn more about the major currency pairs

Population: 66 million

2017 GDP per capita (current prices): $39,730

Trade balance: ($589 billion)

Top exports: Cars, gold, packaged medicaments, gas turbines

Top destinations for exports: US, Germany, France

Top imports: Gold, cars, packaged medicaments

Top origins of imports: Germany, China, US

National currency: Sterling/pound

Major stock exchanges: London Stock Exchange (LSE)

Major indices: FTSE 100FTSE 250

6. India’s economy

Aside from its neighbour on the other side of the Himalayas, India is the other rising economic power expected to move up this list of top ten economies in the not too distant future. India’s economy is very diverse, from traditional village agriculture to computing.

Services represent about two-thirds of the country’s output, boosted by its mastery of the English language to aid the export of business, IT and communication services. Still, the service sector employs less than a third of the national workforce.

Prime Minister Narendra Modi has provided stability since taking office in 2014, and while foreign policy has improved, the government has had issues with its currency after it scrapped high-value rupee notes causing problems around the country.

Read about the most overlooked currency pairs

Population: 1.3 billion

2017 GDP per capita (current prices): $1980

Trade balance: ($183 billion)

Top exports: Refined petroleum, diamonds, packaged medicaments, jewellery, gold

Top destinations for exports: US, United Arab Emirates (UAE), Hong Kong

Top imports: Crude petroleum, diamonds, gold, coal briquettes, telephones

Top origins of imports: China, US, Hong Kong

National currency: Rupee

Major stock exchanges: Bombay Stock Exchange, National Stock Exchange of India

Major indices: BSE Sensex, NSE Nifty

7. France’s economy

France is the other leading nation in the European Union and currently led by Emmanuel Macron, the country’s youngest president since the establishment of the Fifth Republic.

Amid high government spending weighing on public finances and a higher-than-average unemployment rate, Macron is trying to reform the economy at a rapid pace, and not without its consequences. Efforts to restructure labour laws has prompted a series of strikes by public sector employees working in sectors such as transport, for example.

In addition to pharmaceuticals, chemicals and its expertise in aerospace and automotive manufacturing, tourism also plays a significant role in the French economy.

Population: 65 million

GDP per capita (current prices): $39,870

Trade balance: ($163 billion)

Top exports: Planes/helicopters/spacecraft, packaged medicaments, cars, vehicle parts

Top destinations for exports: Germany, Spain, US

Top imports: Cars, aircraft parts, crude petroleum, packaged medicaments

Top origins of imports: Germany, Belgium, Italy

National currency: Euro

Major stock exchanges: Paris Stock Exchange

Major indices: CAC 40

8. Brazil’s economy

Brazil, much like wider Latin America, has been bogged down in politics and scandals in recent years, holding back the country and the region’s potential. Still, Brazil is a formidable economy on the world stage and the leader of its bloc and has managed to outperform its neighbours.

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Despite its population being largely based on the coast and the fact it is home to the world’s largest rainforest, the country’s agricultural and industry sectors play second fiddle to services (like telecommunications or insurance). Services account for over two-thirds of the economy and the bulk of the remainder is comprised of sectors like petrochemicals, textiles and mining. Agriculture accounts for only a fraction of Brazil’s economy.

Population: 206 million

GDP per capita (current prices): $9890

Trade balance: $106 billion

Top exports: Iron ore, soybeans, crude petroleum, raw sugar, sulfate chemical woodpulp

Top destinations for exports: China, US, Argentina

Top imports: Refined petroleum, vehicle parts, packaged medicaments, telephones

Top origins of imports: US, China, Germany

National currency: Real

Major stock exchanges: B3

Major indices: Brazil 50 Index (IBrX 50)

9. Italy’s economy

While the country’s economy remains substantial it is quite split between an industrial-focused north and a less developed south, which is more based on agriculture. This is has been one of the primary causes for the political instability that has made Italy somewhat of a problem child for the European Union, and stoked fears over the future relationship between Italy and the euro (which is particularly prominent amid Brexit and following the breakdown between the EU and Greece).

Population: 61 million

GDP per capita (current prices): $31,980

Trade balance: $152 billion

Top exports: Packaged medicaments, cars, vehicle parts, refined petroleum

Top destinations for exports: Germany, France, US

Top imports: Cars, crude petroleum, packaged medicaments, petroleum gas

Top origins of imports: Germany, France, China

National currency: Euro

Major stock exchanges: Borsa Italiana

Major indices: FTSE MIB

10. Canada’s economy

Canada has closely followed a similar economic stance as its larger neighbour to the south (where about two-thirds of all exports go), but after Prime Minister Justin Trudeau’s Liberal Party broke a decade-long Conservative rule in 2015, the country is shifting more toward the likes of environmental policies and shifting away from its large fossil fuel industry (such as oil sands). Forest products like wood, mining, and oil and gas all play formidable roles in the Canadian economy.

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Still, the country has a significant service industry encompassing a growing technology industry (which is concentrated in its major cities) that is continuing to thrive over manufacturing and resource sectors.

Population: 36 million

GDP per capita (current prices): $45,080

Trade balance: ($94.9 billion)

Top exports: Cars, crude petroleum, gold, vehicle parts

Top destinations for exports: US, China, UK

Top imports: Cars, vehicle parts, computers, delivery trucks

Top origins of imports: US, China, Germany

National currency: Canadian dollar

Major stock exchanges: Toronto Stock Exchange

Major indices: S&P/BMV IPC

Source: IG

UK economy continues to slow

May 28, 2018

UK gross domestic product was estimated to have increased by 0.1% in the first quarter of 2018 which is the slowest pace of growth in five years.

Recent bad weather was attributed as the cause for the downturn in construction and high street spending. Overall, household spending grew by 0.2%, the lowest it’s been for three years.

Additionally, business investment decreased by 0.2% which will no doubt highlight concerns over the strength of the UK economy and it’s ability to maintain stability after it leaves the EU.

Rob Kent-Smith of the ONS said:

“Overall, the economy performed poorly in the first quarter with manufacturing growth slowing and weak consumer-facing services.”

Howard Archer, chief economic advisor to the EY ITEM Club, said:

“The UK economy eked out growth of just 0.1% quarter-on-quarter in the first quarter of 2018. This was the weakest growth rate since the first quarter of 2012. It was down from growth of 0.4% quarter-on-quarter in the fourth quarter of 2017 and 0.5% in the third quarter.

“While first-quarter growth was clearly dragged down by the severe weather seen at the end of February and first half of March, the extent of the slowdown suggests an underlying loss of momentum in the economy.

“Year-on-year growth slowed to 1.2% in the first quarter of 2018, which was the weakest level since the second quarter of 2012. It was down from 1.4% in the fourth quarter of 2017, 1.8% in the third quarter and 2.1% in the first quarter.”

Source: London Loves Business

Fears for UK economy mount as manufacturing expansion slows

May 3, 2018

GROWTH of broad UK manufacturing activity slowed sharply in April to its weakest pace in 17 months, a survey has revealed, raising further concerns over the state of the UK economy.

Manufacturing employment growth meanwhile slowed to its weakest rate in 14 months. The consumer goods manufacturing sub-sector shed jobs for the first time since February 2017, according to the survey published yesterday by the Chartered Institute of Procurement & Supply, and the decline in its employment was the steepest for nearly six-and-a-half years.

The survey findings reinforced economists’ views that severe weather in late February and early March was far from the only factor in UK economic growth grinding to a near-halt in the first quarter.

Seasonally adjusted data published last week by the Office for National Statistics showed UK gross domestic product grew by just 0.1 per cent quarter-on-quarter in the opening three months of this year. This was the UK economy’s weakest quarterly expansion for more than five years.

CIPS’s weak manufacturing survey yesterday weighed on the pound, which fell more than 1.4 cents to $1.3609 and also dropped sharply against the euro.

Financial markets have, in large part as a result of the weak GDP data and CIPS’s survey, reassessed the chances of another rise in benchmark UK interest rates when the Bank of England’s Monetary Policy Committee meets next week.

Rob Dobson, director of survey compiler IHS Markit, said the chances of a near-term rise in rates looked “increasingly remote”.

CIPS’s purchasing managers’ index for the UK manufacturing sector, which measures changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased, fell from 54.9 in March to 53.9 in April on a seasonally adjusted basis.

Although remaining comfortably above the level of 50 deemed to separate expansion from contraction, the manufacturing PMI pointed to the slowest growth in the sector for 17 months. It was also significantly weaker than the reading of 54.8 forecast by economists.

And UK manufacturers’ optimism about the prospects for increased activity in a year’s time slipped to its weakest in five months, amid Brexit-related uncertainty.

Growth in overall output and new orders in the UK manufacturing sector also slowed between March and April. Growth of new export orders slowed to its weakest pace in 10 months.

Mr Dobson said: “The start of the second quarter saw the UK manufacturing sector lose further steam. The headline PMI dipped to a 17-month low as growth of production, new business and employment all slowed.

“While adverse weather was partly to blame in February and March, there are no excuses for April’s disappointing performance, making the chances of a near-term hike in interest rates by the Bank of England look increasingly remote.”

He added: “On this footing, the sector is unlikely to see any improvement on the near-stagnant performance signalled by the opening quarter’s GDP numbers.”

The ONS figures showed UK manufacturing growth slowed to just 0.2% quarter-on-quarter in the opening three months of this year. The sector had grown by 1.3% in the fourth quarter of 2017.

Looking ahead, Mr Dobson said: “The trend in manufacturing production is likely to remain subdued. Weak demand meant firms are seeing backlogs of work fall and stocks of unsold goods rise, limiting the need for output to rise in May.

Business optimism has also dipped to a five-month low as concerns about Brexit, trade barriers and the overall economic climate remained widespread.”

Source: Herald Scotland

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