U.K. Public Budget Posts Highest Short-Fall Since 1993

The U.K. budget deficit for October was the worst for the month since record keeping began in 1993, marking a shortfall of 11.4 billion amid expectations for a 7.0 billion rise in public borrowing, while public sector finances were at 5.9 billion with economist’s consensus of 4.0 billion. At the same time, retail sales rose 0.4% for the second consecutive month in October, with the annual rate of consumption pushing 3.4% higher after rising 2.9% during the previous month, and the data foreshadows an improved outlook for the region as the expansion in monetary and fiscal policy continues to support the real economy. Moreover, the M4 money supply expanded 1.8% during the same period, while the annualized change climbed 11.0% in spite of expectations of 9.9%. The data portrays a mixed long-term outlook for the region as households continue to face a weakening labor market paired with the slump in wage growth however, conditions should continue to improve going into the following year as policy makers take unprecedented steps to steer the economy out of recession. Going forward, with the U.K. general election nearing, the next government will be left with the task of bringing public finances under control without hitting key services. As a result, Britain is probable to see more tax revenue coming in and the deepest spending cuts since the International Monetary Fund bailout in 1976 as policy makers pledge to normalize the public budget.