UK Public Finances in Surplus Decline Post ‘Brexit‘, Pound Continues Rise

Figures from the UK’s Office of National Statistics (ONS) has revealed that the public sector net borrowing surplus was £1 billion in July, a reduction of £0.2 billion from the previous month, in the first data on calendar month finances since ‘Brexit‘.

Many experts predicted a higher surplus that what was posted, with analysts anticipating around the £1.6 billion mark.

Overall, public sector net borrowing, which excludes public sector interests in banks banks, decreased by £3billion to £23.7 billion in the current financial year up to July, compared with the same period a year ago.

While public sector debt net debt, which also excludes public sector banks, at the end of July 2016 was £1,604.2 billion, equivalent to 82.9% of gross domestic product (GDP), this was an increase of £35.3 billion compared with July 2015.

Although the latest debt figure is the second successive month of debt falling as a percentage of GDP, which is also positive as it indicates that GDP is growing faster than the rate of debt.

However, the ONS warned that care should be taken when inferring trends from only a short space of time two months worth of  data, especially given the provisional nature of centred GDP estimates for the latest month.

Despite the comparative positive rates of economic growth that the UK has achieved since 2013, in the second quarter of this year growth was 0.6%, the national debt has remained stubbornly high, with arrears increasing from 86.2% of GDP in 2012.

The central government, now Theresa May’s fledgling administration, required less capital in the second quarter of this year, in comparison to the same time period last year, by £5.1 billion to £22.2 billion.

The pound has persisted in its strengthening against the US dollar, having been boosted  by positive employment and retail sector figures this week, although this morning there has been a slightly negative reaction from traders following the release of the public finance data, as this morning GMT sterling is now buying $1.312 from $1.316.

German Producer Prices Fell by 2% Year on Year

 The German Federal Statistics Office revealed that producer prices in Germany have suffered a decline in July, compared to the corresponding month a year ago, as they were reduced by 2%, although the annual rate of change was smaller in contrast to June, were the fall in prices was 2.2%.

Month on month the figure was more positive, as costs were 0.2% higher between June and July, this also represented a fall as the May to June data showed that prices had increased by 0.4%.

The data again highlights why inflation is subdued in the euro area and for the whole of the European Union, following from the 0.2% stable inflation rate for July that was released yesterday.

Breaking down the headline figure, energy prices were the most influential in forcing downward pressure on producer expenses, by 6.2% year on year for July, prices of intermediate goods dropped by 1.8%, whereas in contrast the prices of non-durable consumer goods rose by 0.4%, prices of capital goods by 0.5% and prices of durable consumer goods by 1.2%.

Taking out the energy sector, the overall index decreased  by 0.5% annually, and by 0.2% from June.

The euros recent bullish performance on the US dollar was slightly diminished this morning CET, where the EUR/USD fell to 1.13 euros from just under 1.135 euros, the European Central Bank has hinted that may extend their quantitative easing (QE) programme in September, currently they are pumping 80 billion euros of QE per month.