UK Economy Grows by 0.6%, Pound Falls in Reaction

UK gross domestic product (GDP) rose by 0.6% in between April and June, a week after the decision to leave the European Union (EU), the figure is above what was anticipated, as estimates predicted 0.5% growth, which the Bank of England (BOE) also expected.

The data from the UK’s Office of National Statistics revealed a rise in growth compared to the first quarter this year, where growth was 0.4%, as the uncertainly of ‘Brexit’ was thought to be a major reason why the economy contracted by 0.2% from the fourth quarter of last year.
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The annual rate of growth is 2.2% higher, comparing the second quarter this year to the corresponding period for last year.

Output rose in two of the main economic categories in the latest figures, as service industries increased by 0.5% and production increased by 2.1%, whereas activity in construction decreased by 0.4%, and agriculture by 1%.

Compared to the first quarter of 2008 before the financial crash began to swarm the world economy, GDP is now thought to be 7.7% higher, from the peak of the first quarter of 2008 to the trough in Quarter 2 2009 the economy shrank by 6.3%.

The pound, which has traded narrowly this week due to the lack of economic data, has not reacted positively to the encouraging figures, as in the wake of ‘Brexit’ , business sentiment in the UK is sill thought to be low.

In the immediate aftermath of the release of the figures, the GBP/USD rate has fallen to $1.308, from beginning the day GMT at $1.316, the strength of the greenback over the pound will be effected significantly in the aftermath of the monetary decision taken by the Federal Reserve Open Committee in the next two days.

According to LMAX Exchange in their daily report, they opined that the markets are still worried about the UK prospects in the wake of ‘Brexit’, they also argued that the about turn of outgoing hawkish BOE Monetary Policy Committee member Martin Weale, who is now in favour of stimulus action, increases the prospect of a BOE rate cut next month.

Consumer Confidence Weakens in Germany

The GfK consumer climate survey in Germany has found that consumer sentiment has fallen, albeit by a slight margin in July, with the ‘Brexit’ decision the main reason why, the index score was 10.0 for August, down from 10.1 in July.

German consumers no longer feel positive about economic expectations, as the indicator lost 8.6 points in July and 9.4 points for next month, which bucked the trend of three successive increases between April and June.
Due to the UK’s decision to walk away from Brussels, the German public do not believe that economic performance will be as strong, in a separate survey respondents were asked how Germany would be effected by ‘Brexit’, 51% said they believed it would have negative effects on the German economy, while around 40 percent dismissed that notion that they would be damaged by it.

Also, the Federal Statistical Office in Germany has reported that the index of import prices decreased by 4.6% in June, compared with the corresponding month of 2015, in May and in April this year the annual rates of change were minus 5.5% and minus 6.6%, respectively.

The index of import prices, excluding crude oil and mineral oil products, decreased by 2.8% compared with the level of a year earlier, while from May to June the index rose by 0.5%.