The British economy was failing to grow and firms had stopped hiring even before the new oil crisis had struck, according to data released by the Office for National Statistics this morning. GDP flatlined in January, showing 0% growth where 0.2% had been predicted. There was also a 5.7% fall in hiring by UK businesses in January, with at least part of the blame being put on rising employment taxes.
The data might normally have sealed the deal on an interest rate cut from the Bank of England next week to boost the economy, but the rise in the price of oil due to the war in Iran makes such a cut much more problematic. Economists normally allow for an overall rise in inflation by 0.1 to 0.2% for each extra $10 on a barrel of oil, and the price of oil has in fact risen by $40 per barrel in two weeks, suggesting inflation rising well beyond the 2% target.
In the midst of all this sterling continues to dance around against the euro at close to an eight-month high. GBP/EUR has gained 0.7% over the course of this week, as the euro struggles against most major rivals, especially the resurgent Australian and Canadian dollars.
This morning’s economic news has helped to push sterling down further against the US dollar, and it has now weakened around 1.5% since Tuesday.
There’s continuing woe for the UK housing market as mortgage rates rose following the disappearing chance of an interest rate cut. This week the Royal Institution of Chartered Surveyors (RICS) survey sank again, as a majority of surveyors were pessimistic in their expectations for house prices and sales activity.
The Bank of England’s problems don’t end there. It was also under fire from some quarters for a decision to replace famous Britons on the banknotes with wildlife images. This followed a public consultation.
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