THE TAKEAWAY: UK trade deficit widens -> Economic growth projected to slow on Euro pressure -> Cable drops to daily low
Data released out of the United Kingdom today showed that the trade deficit widened in September as imports led by oil chemicals imports surged by 3.8%, while exports remained basically unchanged. The September deficit was released at 9.81 billion Pounds, up from the forecasted 8 billion Pounds. Additionally, last months figure was widened to 8.62 billion Pounds from the initially reported 7.77 billion.
Although the trade deficit continues to widen, UK October industrial and manufacturing data released yesterday showed slight rises in production. However, The UK statistics office said the positive data will have a “negligible” effect on its gross domestic product estimate with British GDP slated to fall over the next two quarters. Bank of England officials were recently quoted saying the GDP growth pace may not be sustained and there is chance of stagnation in 2011’s final quarter.
The Bank of England last month expanded government stimulus by 75 billion pounds, and the government hopes to increase lending as the European debt crisis increases fears of a UK recession.
The Pound continued to drop against the Dollar following today’s data, reaching a fresh daily low by the 1.6000 area immediately following the release. Macro focus remained on European developments, with Italian Prime Minister Berlusconi joining recently-ousted Greek PM Papandreo as the latest victim of the volatile single currency market.