UK Pound Reacts Positively After Latest GDP Results

The UK pound has appreciated against major countries, following the announcement of their GDP figures, which revealed 0.5% growth for the fourth quarter for last year.

Since the release of the data from the UK’s Office of National Statistics in early part of yesterday afternoon GMT, the pound leapt from buying just under $1.043 to over $1.044 this morning. The pound is now currently buying $1.436.

The pound has enjoyed a steeper rise against the euro, as sterling was buying EUR1.31, to peaking EUR 1.323 this morning, but has slightly fallen down to EUR 1.31.

Despite the increase in the pound’s value, there have been warnings from analysts that the prospect of the UK leaving the European Union, with a planned referendum likely for this year, will damage British business and the pound’s value.

Research company Markit said that the uncertainly over the ‘Brexit’, alongside weak overseas growth, and financial market volatility, will almost certainly unsettle the UK economy effecting growth.

According to Bank of America Merrill Lynch Global Research, the pound is set to weaken due to the risks incurred by the ‘Brexit’.

Although if the risks are removed , the bank expects the pound to rise, as the UK may hike interest rates in an economy where employment figures have risen.

UK GDP Increases By 0.1% Quarter on Quarter

The UK’s 0.5% GDP growth for the fourth quarter, surpassed the 0.4% that was recorded for the previous quarter between July to September.

Year on year growth contracted, as for the whole of 2015 the economy expanded by 2.2%, but this was down on 2.9% for 2014. In comparison for the fourth quarter GDP was 1.9% higher year on year.

Two of the main industrial groupings displayed the most progress. Services activity rose by 0.7%, and agriculture productivity increased by 0.5%, in contrast production decreased by 0.2%, while construction output decreased by 0.1%.

The figures also revealed that GDP was estimated to have been 6.6% higher than the pre-economic downturn peak of the first quarter of 2008. From the first to the second quarter of 2008, the economy tightened by 6.1%.

Euro Area Inflation Up to 0.4%

The latest flash estimate from Eurostat have said that inflation is set to rise to 0.4% in January this year, rising from 0.2% last month.

Services is expected to have the highest rate in January of 1.2%, compared with 1.1% in December, followed by food, alcohol and tobacco which rose by 1.1%, but was 0.1% down month on month

Energy prices again remained the biggest drag on inflation, as prices were reduced by 5.3%, although this was smaller than the 5.3% fall last month

Household real income per capita up in both euro area and EU28

In the euro area, household income per capita increased by 0.5% in the third quarter of last year, after an increase of 0.1% in the previous quarter.

Consumption from households also increased by 0.4% for the third quarter of last year, quarter on quarter this was unchanged.

Across the European Union, household income per capita was slightly down on the euro area, rising by 0.4%.

Although the figure represented a relatively higher increase in income than the euro area, as for the previous quarter income had decreased by 0.1%.

Household consumption leapt from 0.2% for the previous quarter to 0.7% for the third quarter.

The rise in consumption is a boost for the European Central Bank, in their attempt to lift inflation from its current rate to their 2% target.