THE TAKEAWAY: UK economy confirmed to have grown 1% in Q3 according to second estimate -> BoE says economy might return to negative growth in Q4 -> Sterling erases earlier losses
A second estimate of the UK gross domestic product for Q3 confirmed 1.0% economic expansion over the quarter, as the Olympics and previous quarter’s Jubilee holiday gave the UK a one-time spike in growth. The UK economy contracted by 0.1% from Q3 2011, and did not remain unchanged as previously estimated by the Office of National Statistics.
According to the Office for National Statistics’ release, output in production industries rose by only 0.9%, down from a previously estimated 1.1%. Meanwhile, the service industry was confirmed to have seen a 1.3% rise in output. Also, compensation of employees was up 1.4%, and household final consumption expenditure increased 0.6% in Q3. In the same quarter, exports grew by 1.7%, while imports shrunk 0.4%.
The 1% growth in GDP was the best quarterly expansion in 5 years, and it followed three straight quarters of economic slowdown, but the Bank of England has predicted that the GDP growth may return to negative in the current fourth quarter, as the 1% expansion was due to one time factors.
However, Sterling erased some earlier losses against the US Dollar in forex markets, following the confirmation of the previously estimated growth. GBPUSD is now trading around 1.6033, and it could find resistance at 1.6057, by the 76.4% retracement of the decline from April’s high to June’s low. Support could be provided by the key 1.6000 figure.
GBPUSD 15-minute: November 27, 2012