Sterling had a positive day against the US dollar, strengthening by around half a cent and regaining the week’s losses. There has also been some success against the euro too, with a similar rise since the start of the week.
Nevertheless, as we reach the end of the month GBP/USD has been heading for its worst month since the mini-Budget disaster last September, losing over 3%. There has been hope, however, from surprising news on the British economy just released.
This morning we have heard Gross Domestic Product (GDP) for the UK, which showed that the British economy grew slightly more than expected in the year to the end of June, at 0.6% instead of 0.4% as previously believed. Indeed, today’s GDP release from the Office for National Statistics (ONS) shows that the UK economy grew faster than other G7 rivals in 2022 and also in 2021 (with 8.7% growth).
However, economic performance grew less in the second quarter than in the first quarter.
This follows on from yesterday’s GDP for the USA which showed a slightly slowing US economy, growing at an annualised rate of 2.1% in the second quarter of 2023.
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There was a mass of data yesterday from the eurozone, including Spanish inflation rising to 3.5%, albeit with core inflation, with fuel and food taken out, falling again, to 5.8%. German inflation also fell more than expected, to 4.5% (a huge drop from 6.1% last month) with core inflation also on the way down.
There were readings for consumer confidence too, with Italian business and consumer confidence, Spanish consumer confidence and eurozone-wide consumer confidence all falling.
So, it looks as though the severe round of tightening monetary policy from the Federal Reserve, Bank of England and ECB is showing its effects.
Monetary policy is having its effect on the housing market too. A report from Zoopla found that asking prices for houses are falling in the UK, with the average vendor discounting by 4.2% in September – equating to over £12,000 for an average property. In London and the South East the discount was even larger – 4.8%. Could an end be in sight to housing’s woes? The average five-year fixed mortgage fell below 6%.
Problems for property on the other side of the world too. In China, executives at Evergrande, the huge but troubled property group, have been arrested on charges of financial crimes. They include Hui Ka Yan, once said to be Asia’s richest man. At one point the company had 720,000 unfinished flats on its books.
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