Daily Brexit Briefing: UK Growth Beats Expectations, Nissan Boost for Auto Industry
- UK third-quarter growth beats expectations, services sector dominates.
- Strong Distributive Trades Survey underscores UK growth uptick.
- Nissan boost for UK automotive industry, 7,000 jobs safeguarded.
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The UK economy shrugged off post-Brexit slowdown fears and grew by +0.5% in the third quarter, topping analysts’ expectations of +0.3%-0.4% growth. The Pound pushed to a one-week high against the US Dollar before paring gains as expectations for an additional UK interest rate cut at next week’s Bank of England meeting faded. The country’s dominant services sector once again fueled economic expansion, rising by +0.8%. Today’s data, although lower than the +0.7% growth recorded in the second quarter, mark the fifteenth consecutive quarter of expansion in the UK economy.
In another boost for the UK economy, the monthly Distributive Trades Survey from the Confederation of British Industry released today highlighted underlying strength in the UK economy. The headline reported sales balance, which measures sales volumes compared with the same month a year ago, soared to +21 in October from -8 in September. A note of caution however as the survey only covers the sales of 126 companies, of which 60 are retailers.
Japanese car giant Nissan has revealed that it will make its new Qashqai model in the UK, a move that will safeguard around 7,000 jobs in the North-East of England. The vote of confidence in the UK auto industry, the first since the UK decided to leave the EU, was welcomed by Prime Minister Theresa May.
“It is a recognition that the Government is committed to creating and supporting the right conditions for the automotive industry so it continues to grow – now and in the future," she said. “This vote of confidence shows Britain is open for business and that we remain an outward-looking, world-leading nation.”
UK government bond (gilt) yields rose back to levels last seen before the UK decided to leave the EU (yields go up as prices fall) as UK inflation expectations continue to push higher, eroding the value of fixed income securities. In addition, today’s robust third quarter GDP data effectively take any interest rate cut off the table at next week’s Bank of England policy meeting.
In late European trade, GBP/USD trades a fraction lower at 1.2185 after spiking to an intra-day high of 1.2272 on the UK GDP release, the FTSE 100 is 0.15% higher at 6,970 and the 10-year gilt yields 1.255%, up nine basis points on the session, at the time this report was written. See the review of today’s European trading session.
See the DailyFX Economic Calendar for the remainder of European data through the end of this week.
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