fundamental alert

U.K. Public Finances Surge Higher, Increased Borrowing to Continue

Monday, 20 October 2008 08:41:27 GMT  |  DailyFX Research

U.K. September public finances came in worse than expected. Net borrowing reached GBP 8.1 bln, a new record high for the month of September and versus a median estimate for 6.7 bln. The August reading was revised to 10.3 bln from 10.4 bln. Meanwhile, net cash requirement was 12.6 bln, also a new record high for September and compared to a median forecast of 10.0 bln. Data hence highlights the rapidly deteriorating state of public finances, which is likely to become worse as the economy slows and even contracts over the next 12 months. The government has already indicated that it is likely to borrow more as revenues falter, to be able to provide a boost to the economy to counteract the slowdown.

Meanwhile, U.K. M4 money supply growth picked up yet again in September with growth of 1.4% m/m and 12.2% y/y, versus 1.5% and 11.5% respectively in August. However, given the rapidly deteriorating growth outlook for the U.K., money growth acceleration is unlikely to cause much of a concern for the BoE, as inflation growth is expected to slow sharply next year. Meanwhile, M4 lending for September was recorded at GBP 30.6 bln, versus 23.4 bln in August.

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars