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Economy Figures Set To Show ‘Positive Growth’

Economy Figures Set To Show ‘Positive Growth’

Data is due to show the economy grew by around 0.5% over April, May and June – but analysts say the recovery is still fragile.

Economists are predicting good news when the first estimate of economic growth during April, May and June is revealed next week.

Analysts expect the Office for National Statistics to say that the economy grew by around 0.5% when it reveals its preliminary estimate for Q2 GDP on Thursday.

They point to several important economic indicators which have been positive in recent months.

Consumer confidence was at a 25-month high in June. Business confidence in Q2 was at its highest since 2007.

Retail sales volumes rose by 0.9% between Q1 and Q2. New car sales were 13.4% higher in June compared with the same month last year.

Former government economic adviser Vicky Pryce told Sky News: “I think what’s going on right now is that the consumer is very keen on spending.

“The consumer has reduced his savings ratio very substantially from about 7% a year ago to about 4% now so they are spending their way out of this recession.

“It’s not because they’re earning an awful lot more, because of course average earnings have not really moved very much and there are all sorts of restrictions in terms of public sector wages, so they are suffering a little bit from that. But they are feeling a lot more confident so they’re out there spending.”

Even the International Monetary Fund, which recently encouraged the Government to ease public spending cuts, has revised upwards its forecast for UK economic growth in 2013 from 0.7% to 0.9%.

However, some of the economy’s biggest problems remain with more Government cutbacks still on the horizon, banks still reluctant to lend and consumer prices rising at a faster rate than average wages.

Howard Archer, chief UK & European economist at IHS Global Insight, said: “There are still significant headwinds to growth which suggest that the upside for growth will be limited for some time to come and that the economy will likely remain prone to periodic losses of momentum.

“While we are encouraged by the recent extended and diverse good news on the UK economy, we currently remain cautious in markedly raising our GDP growth forecasts – especially given the many false dawns that there have been in recent times and the fact that events in the eurozone still pose a significant threat.”

There is also mounting evidence of a resurgence in the property market with house prices rising in June and mortgage approvals at a 41 month high in May.

However critics of the Government’s homebuying incentives such as Help To Buy have warned that it risks fuelling a property bubble.

Brunel University professor Moorad Choudhry told Sky News: “I’d like to ask why is the Government subsidising house purchases? That is something we got out of years back when we unwound tax relief on mortgages’ interest.

“If I inject cheap money into the stock market and it rises, that’s not genuine growth. It’s conceptually similar to subsidising anything and it’s a false growth.”

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The Governmen Plain Cigarettes And Alcohol you Turn

The Governmen Plain Cigarettes And Alcohol you Turn

Plans for plain cigarette packaging are postponed, amid reports that minimum pricing for alcohol will be scrapped

The Government is facing anger from health campaigners after plans for plain packaging for cigarettes were put on ice while it emerged minimum pricing of alcohol will be killed off altogether.

Health Secretary Jeremy Hunt said a decision on whether to go ahead with plain packaging in England would be postponed until ministers had had a chance to assess the impact of a similar scheme introduced last year in Australia.

Meanwhile, it was reported Home Secretary Theresa May will formally confirm next week – before MPs finally break for the summer – that the Government has dropped plans for minimum pricing of alcohol in England.

Downing Street denied the Tories’ elections strategist Lynton Crosby – who has been linked to lobbying by the tobacco industry – was responsible for the delay to plain packaging.

However, there was widespread suspicion that he was behind the decision – even among some Tory MPs.

Mr Crosby, who was brought in last year after masterminding Boris Johnson’s re-election as London mayor, has reportedly advised David Cameron to “get the barnacles off the boat” and concentrate on the core concerns of voters such as the economy.

Conservative backbencher Sarah Wollaston, a GP who has campaigned for both plain packaging and minimum pricing, said the result would be more lives ruined for the sake of political expediency.

“RIP public health. A day of shame for this government; the only winners big tobacco, big alcohol and big undertakers,” she wrote on her Twitter feed.

“What a tragic waste of an opportunity. ‘Barnacles scraped off the boat’ AKA more lives ruined for political expediency.”

A Downing St spokesman insisted Mr Crosby had no involvement in the decision on plain packaging although he acknowledged that he did take part in meetings in Number 10.

“He is not employed by the Government. He is employed by the Conservative Party as an adviser to the Conservative Party. He doesn’t have a pass for Downing Street. He doesn’t have a desk at Downing Street. Does he attend meetings at 10 Downing Street? Yes, he does,” the spokesman said.

In the Commons, Public Health Minister Anna Soubry insisted the Government’s position on plain packaging had not changed, but she refused to to be drawn on how long ministers would wait before deciding whether to press ahead.

For Labour, shadow public health minister Diane Abbott said it was a “disgraceful U-turn” by ministers.

“We have to ask, what happened? We suspect Lynton Crosby happened.”

There was anger among health campaigners, with British Lung Foundation chief executive Dr Penny Woods describing the decision as “bewildering”.

British Heart Foundation chief executive Simon Gillespie said: “This was the chance for a real show of strength, courage and confidence but instead the Government has capitulated in the face of industry pressure.

“Critical legislation that will help stop young people getting hooked on a lethal habit has now been left hanging in the balance. The longer we have to wait for it, the more harm cigarettes will do to the next generation.”

However, the move was welcomed by many Conservative MPs who oppose what they regard as a “nanny state” approach to public health.

While ministers are expected to announce a decision to scrap plans for minimum alcohol pricing before recess, the Prime Minister’s spokesman would not be drawn.

He said “the position remains the same” on alcohol pricing, adding: “The Prime Minister has set out his views in depth, we’ve had a consultation and we will respond in due course.”

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New Bank Of England Governor Mark Carney

New Bank Of England Governor Mark Carney

  • Posted: Jul 01, 2013
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Mark Carney is hailed as “the outstanding banker of his generation” but has his work cut out after replacing Mervyn King.

Mark Carney has become one of the most powerful central bankers in the world after taking the reins at the Bank of England.

The Canadian has replaced Sir Mervyn King amid mounting expectation of a more activist stance towards monetary policy as the BoE looks to keep the UK recovery on track.

Hailed as the “outstanding central banker of his generation”, Mr Carney has moved from the Bank of Canada to take up the job in Britain.

The 48-year-old received a boost on his first day as figures showed the steepest surge in manufacturing activity for more than two years.

Manufacturing output hit a 25-month high of 52.5 in June, according to the Markit/CIPS purchasing managers’ index (PMI), fuelling hopes of stronger growth.

His arrival also came as the BoE revealed strong data showing British mortgage approvals rose in May to their highest level since December 2009.

Mr Carney is credited with helping the resource-rich Canadian economy recover faster from the downturn than any other developed major nation.

He has taken office amid mounting signs of economic recovery in the UK although recent official figures revealed how far Britain has to go before returning to its pre-crisis conditions.

Widespread revisions by the Office for National Statistics meant that the double-dip recession at the end of 2011 and first half of 2012 was erased from history.

However, revised data revealed that the initial recession following the financial crisis was far worse than first feared, putting the economy even further behind its pre-crisis level.

GDP is now 3.9% lower than its peak in the first quarter of 2008. Previously it was estimated to be 2.6% below.

One of Mr Carney’s first tasks is to chair the Monetary Policy Committee’s monthly meeting as it gathers on Wednesday and Thursday to decide on interest rates.

While economists are not expecting any action in July, many believe the Bank will move to cement the recovery over the next few months.

Vicky Redwood, at consultancy Capital Economics, said: “Bold action by the new governor would help to cement any recovery, but he cannot afford to be timid.”

She added: “The recent pick-up in the economic news has begged the question of whether Mr Carney actually needs to do anything any more.

“But the recent modest improvement is still far from the “escape velocity” he has said he wants to achieve.”

More on Mr Carney’s plans for monetary policy are expected from August onwards, with the possibility of introducing specific forward guidance on the cards as well as a further cash injection into the economy.

His thoughts on the economy will be outlined when he makes his debut at the inflation report news conference on August 7, his first major media appearance.

Mr Carney is the first non-British citizen to govern the Bank of England in its 319-year history.

Hand-picked by Chancellor George Osborne, he will lead an institution now responsible for financial stability and keeping Britain’s banks on an even keel – as well as its main task of monetary policy.

It was this track record which prompted Mr Osborne to overlook favourites including Bank veteran Paul Tucker and Adair Turner, the former chairman of the City watchdog.

Mr Carney, who will receive an £874,000 pay package – including a £5,000-a-week housing allowance – inherits a venerable institution which has expanded rapidly in recent years.

The Bank’s workforce has almost doubled to 3,500 from about 1,800 in 2008

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George Osborne Reaches Deal On Spending Cuts

George Osborne Reaches Deal On Spending Cuts

  • Posted: Jun 23, 2013
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(Reuters) – Chancellor George Osborne completed talks on Sunday with government departments aimed at securing spending cuts worth 11.5 billion pounds in 2015-16 to help reduce the country’s budget deficit, the Treasury said.

George Osborne on the BBC

Britain’s Chancellor of the Exchequer George Osborne appears on the BBC’s Andrew Marr Show, presented by Sophie Raworth, in this photograph provided by the BBC, in London June 23, 2013.

The finance ministry said it had reached agreement with all departments, three days before Osborne is due to publish details of their spending limits on June 26.

The talks to find spending cuts starting in 2015 – when voters go to the polls – posed a political headache for Osborne, particularly over the sensitive defence budget and a business department under pressure to do more to revive the economy.

Osborne, who announced the end of the talks on Twitter, will now seek to persuade voters that he has a credible plan to build on recent signs that the economy is gaining strength after two years of stagnation.

He is expected to give more details on Wednesday of billions of pounds of infrastructure spending designed to bolster the recovery.

“We have completed the spending round savings early and without all the arguments you normally get,” a Treasury spokesman said. “This shows our determination to take the tough decisions needed to deliver our economic plan and to turn Britain around.”

Osborne said earlier that the budget deficit was still too high and he was committed to trying to reduce borrowing and cutting the deficit.

“We are out of intensive care and our job now is to secure the recovery,” Osborne told BBC television. “There certainly is a chance of a relapse if we abandon our economic plan.”

Britain’s Conservative-led coalition government is sticking with its central economic policy of reducing a deficit that peaked at more than 11 percent of gross domestic product before it came to power in May 2010.

Despite tax rises and spending cuts, public borrowing has remained stubbornly high over the past year, and data on Friday showed public net debt climbed to record levels in May.


A deal was reached with the defence department on Saturday, Osborne said, ending what analysts saw as one of the most difficult sets of negotiations.

General Peter Wall, the head of the army, said last week that more cuts would seriously damage the country’s chances of success in future wars.

Osborne said the defence deal would see cuts to civilian staff numbers, while protecting Britain’s military capability.

Agreement was only reached on Sunday with the business department, run by Vince Cable, a senior member of the Lib Dems, the government’s junior coalition partner.

Labour, which leads the Conservatives by around 10 points in the polls with the next election due to be held in 2015, accuses the coalition of choking the recovery with its austerity drive.

Labour finance spokesman Ed Balls said he would adopt Osborne’s day-to-day spending limits for 2015-16 if his party wins the election. However, he wanted the coalition to spend 10 billion pounds more on capital projects.

Balls said he would be prepared to borrow more to finance extra capital expenditure, an admission junior Conservative finance minister Sajid Javid held up as evidence that Labour couldn’t be trusted to balance the books.

“If George Osborne had done that last year or the year before, we wouldn’t have had such a flatlining economy,” Balls said.

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Bank of England 2013  Economy Q2

Bank of England 2013 Economy Q2

  • Posted: Jun 13, 2013
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The 2013 Q2 issue of the Bank of England Quarterly Bulletin is published today.

The onset of the financial crisis in 2008 brought an end to the ‘Great Stability’ period, making prospects for UK and global economic growth not just weaker, but more uncertain. Macroeconomic uncertainty: what is it, how can we measure it and why does it matter? focuses on how heightened uncertainty might affect the economy through a variety of channels – for example, depressing demand for goods and services as firms and households choose to delay spending decisions, or impairing the supply side of the economy by affecting investment decisions or credit provision. While uncertainty is not directly observable, this article presents a range of indicators based on data from financial markets, consumer and business surveys and media citations. Many of these indicators have remained elevated in recent years. And a simple empirical model supports the view that uncertainty has contributed significantly to the depth of the recent recession and weakness of the recovery.

Cross-border banking can have considerable long-run benefits, by diversifying the available sources of lending and borrowing. But such flows can also amplify risks in times of stress. Cross-border bank credit and global financial stability describes how cross-border bank lending contributed to the build-up in vulnerabilities before the recent crisis – in particular by generating mismatches on banks’ balance sheets of both currency and maturity – and exacerbated the bust once the crisis hit. The article then considers possible policy responses of central banks to prevent or mitigate such a scenario in the future, from the perspective of recipient countries as well as the global system as a whole.

The Old Lady of Threadneedle Street describes the origins of this popular name for the Bank – namely, caricature of the institution by the late 18th century political satirist, James Gillray. Promoting an exhibition that runs in the Bank of England Museum until the end of December entitled Cartoons and Caricatures, the article gives a brief historical context for the original ‘Old Lady’ cartoon before discussing some of the graphic satire of the Bank and its activities from the two centuries that followed. This includes the work of modern‑day political cartoonists such as Steve Bell.

Also in this edition: Do inflation expectations currently pose a risk to the economy? concludes that there is little evidence to suggest that inflation expectations have become less-well anchored to the target over the past year. Public attitudes to monetary policy reviews public awareness and satisfaction of monetary policymaking in the UK over the past year. It finds, for example, that in the latest survey more respondents thought that the Bank’s inflation target was about right than those who thought it was too high or too low.

Central counterparties: What are they, why do they matter and how does the Bank supervise them? is a primer on clearing houses (this article was pre-released on Monday 10 June). Finally, the regular Markets and Operations article reviews developments in financial markets and the Bank’s official operations in the period between the previous Bulletin and 24 May 2013.

More economic news from Bank of England

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Bank of England 2013  Economy Q1

Bank of England 2013 Economy Q1

  • Posted: Mar 14, 2013
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The 2013 Q1 issue of the Bank of England Quarterly Bulletin is published today.

Since the onset of the financial crisis, the MPC has injected substantial stimulus into the economy through purchases of assets as part of its programme known as quantitative easing (QE). These purchases have been carried out via the Asset Purchase Facility (APF), which is owned by the Bank of England and indemnified by Her Majesty’s Treasury (HMT). In November 2012 a process for regular cash transfers between the Bank of England’s Asset Purchase Facility (APF) and Her Majesty’s Treasury (HMT) was established. The profile of cash transfers between the Asset Purchase Facility and Her Majesty’s Treasury explains how the possible size of the transfers varies depending on a number of uncertain factors, including the price at which the assets held by the APF are ultimately sold and the future path of Bank Rate. While the initial transfers are from the APF to HMT, it is likely that they will be offset by payments in the opposite direction in the future. But the ultimate net amount that will be transferred is uncertain, and a wide range of outcomes is possible. An interactive spreadsheet published alongside the article (available on the Bank’s website via the link below) allows users to examine for themselves how the transfers depend on the assumption made.

In April 2013, a new regulatory framework for the UK financial sector will come into force, which will result in the Bank of England gaining significant new responsibilities. Changes to the Bank of England gives an overview of the changes that are happening to the Bank. This includes the creation of the Prudential Regulation Authority (PRA), responsible for the microprudential regulation of individual deposit-takers, insurers and major investment firms; and the Financial Policy Committee (FPC), responsible for identifying, monitoring and taking action to remove or reduce risks to the resilience of the financial system as a whole. The Bank will also take on new responsibilities in relation to financial market infrastructures, including central counterparties. The article summarises these changes in one place, alongside the revised governance processes that are being put in place to ensure that the Bank carries out its new responsibilities effectively and is fully accountable to Parliament and the public.

Two articles consider the importance of different types of corporate indebtedness from the perspective of financial stability. Private equity and financial stability notes the dramatic increase in acquisitions of UK companies by private equity funds in the mid-2000s. Many of these buyouts, especially the larger ones, were highly leveraged and the increased indebtedness of such companies poses a risk to the stability of the financial system – a risk that is compounded by the need for companies to refinance debt maturing over the next few years in an environment of much tighter credit conditions. Meanwhile, the boom and bust in the commercial property market also played a key role in the recent financial crisis in the UK. Commercial property and financial stability explores the behaviour of some of the key players in this market, noting that an increase in the use of leverage and maturity mismatch contributed to both the rise in prices and the subsequent fall. In order to protect financial stability, the new Financial Policy Committee will be alert to the risks posed by such factors, both in the commercial property market, for lending tied to private equity buyouts, and for build-ups of corporate debt more generally.

This edition also introduces The Agents’ company visit scores, which are based on the 5,500 bilateral meetings that Agents have with individual UK firms every year. Another article sets out the rationale for The Bank of England Bank Liabilities Survey, the first results of which will be published on 26 March 2013. Finally, the regular Markets and Operations article reviews developments in financial markets and the Bank’s official operations in the period between the previous Bulletin and 22 February 2012.

More economic news from Bank of England

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Bank of England 2012 Economy Q4

Bank of England 2012 Economy Q4

  • Posted: Dec 18, 2012
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 The 2012 Q4 issue of the Bank of England Quarterly Bulletin is published today.

The Funding for Lending Scheme (FLS) was launched over the summer by the Bank of England and HM Treasury. It is designed to incentivise banks and building societies to boost their lending to UK households and businesses. Specifically, banks and building societies are offered funding with both the amount and its price depending on the amount they lend. An article in this edition describes in detail the thinking behind the scheme, including describing the mechanics of how the scheme will work. The Article notes that by reducing funding costs, the FLS should lead to more and cheaper credit flowing into the real economy than otherwise. Early signs have been encouraging: market funding costs for UK banks have fallen sharply and many loan rates have fallen. But given the usual lags from credit being offered to loans being made, the FLS is unlikely to materially affect lending volumes until 2013.
The UK economy has received a significant amount of monetary stimulus since the onset of the financial crisis. Bank Rate has been reduced to its lowest level in its 300-year history and the MPC has purchased £375 billion worth of assets since the launch of its asset purchases programme (or QE) in early 2009. But despite this significant amount of stimulus, broad money growth has been persistently weak since 2008, without any precedence in the past half century. So it is important to investigate what impact QE has had on broad money. The article – What can money data tell us about the impact of QE? – analyses the impact of QE by using a money accounting framework, focusing on the period during which the second round of asset purchases took place. It shows that the monetary impact of QE2 looks very similar to that of QE1, with around 60% of asset purchases having fed through into broad money. But whereas in QE1 most of the 40% ‘leakage’ could be explained by bank balance sheet repair, during QE2 the largest ‘leakage’ came from sales of government debt by banks. So whereas the first two rounds of QE seem to have had a similar proportionate impact on money, there is some evidence that the transmission mechanism of QE may have varied over time.
The financial crisis has powerfully demonstrated the need for a new approach to financial regulation. Major reforms are therefore under way, aiming to establish a UK regulatory framework which is more focused on the issues that matter and better equipped to deliver financial stability. These reforms will come into effect in April 2013. The Financial Services Authority will cease to exist in its current form, and its responsibilities will be transferred to two new bodies – the Prudential Regulation Authority (PRA), a part of the Bank of England, focusing on prudential issues; and the Financial Conduct Authority, a separate body, focusing on business and market conduct. Additionally, a Financial Policy Committee will be established within the Bank, focusing on the stability of the financial system as a whole. The article in this edition focuses on the Prudential Regulation Authority. It sets out the PRA’s role in the new regulatory framework, describing the PRA’s statutory objectives of promoting the safety and soundness of firms and contributing to policyholder protection. The PRA will advance these objectives by setting out expectations that firms should meet. The article goes on to describe how the PRA will supervise firms against these expectations. Importantly, it will do this using a judgement-based approach, and one that is both forward-looking and focused on the key risks posed to the stability of the UK financial system.
This edition also includes analysis from the 2012 NMG Consulting Survey which looks at influences on household spending and saving; an article on The role of designated market makers in the new trading landscape; and the regular Markets and Operations article reviewing developments in financial markets and the Bank’s official operations in the period between the previous Bulletin and 26 November 2012.
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Bank Of England Says UK Economy Set To Shrink

Bank Of England Says UK Economy Set To Shrink

  • Posted: Nov 14, 2012
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Britain’s weak economy may shrink in the last three months of the year and growth will remain sluggish into 2013, the governor of the Bank of England warned Wednesday.

The central bank in the UK warning came after the country’s gross domestic product on annual basis unexpectedly grew by 1 percent in the third quarter, ending a nine-month recession.

“Welcome as that is, it is not a reliable guide to the future,” Governor Mervyn King said at a news conference while introducing the Bank’s quarterly Inflation Report.

“Output growth is likely to fall back sharply in Q4 as the boost from the Olympics in the summer is reversed – indeed output may shrink a little this quarter.,” King said.

The bank also lowered its Global domestic product growth forecast for 2013 to about 1 percent.

“We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while,” the governor added.

King said the Bank “has not lost faith” in quantitative easing, the economic stimulus program of asset purchases which has pumped 375 billion pounds ($595 billion) into the British economy since 2009.

But there was a growth spurt in the third quarter  and the persistence of inflation above the official 2 percent target led the Bank’s Monetary Policy Committee to decide against any increase in Quantitative easing this month.

The Office for National Statistics said Wednesday that that the U.K. unemployment rate fell to 7.8 percent in the July-September period, down from 8.0 percent in the previous three months and from 8.2 percent in the year-earlier period.

There was in increase of 10,000 in the number of people claiming unemployment benefits in the month of September. Martin Beck, an analyst at Capital Economics, says that may signal that the job market is starting to weaken again.

“The labor market’s recent resilience may finally be starting to fade,” Beck said.

Meanwhile the statistics agency said that pay growth of 1.8 percent in the last year continued to lag behind the rate of inflation, currently 2.7 percent.

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Sir Mervyn King  UK GDP May Contract Again In Q4

Sir Mervyn King UK GDP May Contract Again In Q4

  • Posted: Nov 14, 2012
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Bank of England governor Mervyn King has said the UK economy may contract once again in the fourth quarter of 2012 despite moving out of recession in Q3.

Speaking after the publication of the Bank’s quarterly inflation report, Mervyn King  said it is “difficult to discern” the true path of GDP and said the UK recovery may start later than previously forecast.

He also pointed to the strength of sterling as a negative factor for the economy, saying a strong pound is undermining competitiveness and may result in a slower recovery.

The governor said the Q3 GDP rise, estimated to be 1% according to the Office for National Statistics, was fuelled by one-off factors, meaning “headline growth is consequently likely to fall back sharply in Q4”.

The Bank has also lowered its  Gross domestic product estimates for future quarters.

The Bank of England upped its inflation forecast, citing “unexpectedly large” rises in energy prices, and now expects CPI inflation to fall back to its target a full year later than it forecast in August’s report.

The Bank’s charts suggest the consumer price index will drop to 1.8% in two years’ time.

Sir Mervyn King added the Bank’s Monetary Policy Committee had not lost faith in the ability of its quantitative easing programme to help the economy, but said the transfer of QE proceeds to the Treasury was equivalent to a further round of asset purchases.

He said that decision, coupled with the Bank’s higher inflation forecasts, were the principal reasons behind the decision not to unveil further asset purchases this month.

Sterling fell against the dollar following the governor’s comments, moving to a day low of $1.5862, while the euro rose to the highest level against the pound since 1 November at 80.35p.

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Olympics Helps Great Britain To Get Out Of Recession

Olympics Helps Great Britain To Get Out Of Recession

  • Posted: Oct 25, 2012
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There was a better than expected growth in the Uk economy after 2012 Olympics.

Analysts today confirmed that the Olympics has grown the UK economy and strong ticket sales helped the UK exit the longest double-dip recession since the Second World War

This is the first estimate of how the economy performed in the third quarter of 2012, the Office for National Statistics (ONS) confirmed a return to growth of 1% over the three months following a 0.4% contraction in GDP in the previous period. That was higher than analysts had expected and the strongest quarter of GDP growth for five years.

In addition to 2012 Olympics sales there was another big national event, the Queen’s Diamond Jubilee that stimulate Uk’s economy.

The Olympic 2012 also helped lift a range of other services including employment agencies, creative arts, office administration, accommodation and food and beverages.

Overall the service sector, which takes in 75% of the UK economy, grew by 1.3% in the period while industrial output grew by 1.1%.

Construction sector has shrieked by 2,5% which impacted on GDP results.

This has impact on the construction sector and as you may know there are a lot of construction site that are not completed yet.

This is good news for the Government which are under pressure to stimulate growth.

The Treasury released reaction from the Chancellor, George Osborne via Twitter: “There is still a long way to go but these figures show we’re on the right track and are a sign the economy is healing,” he said.

“We’ve cut the deficit by a quarter, over one million jobs have been created in the private sector, inflation is down and the economy is growing.

“Yesterday’s weak data from the eurozone were a reminder that we still face many economic challenges at home and abroad.

“By continuing to take tough decisions to deal with debt & equip our economy we are laying the foundations for lasting prosperity.”

The better than expected growth now makes it less likely that the Bank of England will look to extend further its policy of Quantitative Easing next month, when most economists had predicted further asset purchases to boost money supply further.

The bank has spent £375bn to date on its asset purchase scheme and its Monetary Policy Committee may decide to adopt a ‘wait-and-see’ approach at its next meeting.

Citigroup economist Michael Saunders mentioned that it was clear the UK faced “serious headwinds” ahead and the possibility of a ‘triple-dip’ recession could not be ruled out because of remaining weaknesses and the threat from the Euro area.

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