Economy’s best year since 2007

Paresh Davdra is the Dealing Director of RationalFX, Currency Specialists. Tuesday 03rd February 2015 07:24 EST

While it was also less than the 0.6 percent forecast, it still marked the eighth straight period of expansion and capped the economy’s best year since 2007. A leading economist at the (ONS) Office for National Statistics, said the cooling was mainly due to “erratic" sectors including construction and mining. Stating – It was too early to say if there’s a general slowing-down of the economy.

UK 10-year bond yields fell to a record low of 1.402 per cent, as investors rushed to plough cash into an asset largely regarded as "safe". The fall came a day after Bank of England chief economist Andrew Haldane admitted that "there's no rush" to raise interest rates. The base rate has now been at 0.5 per cent for 70 consecutive months.

At the same time, the Bank's governor, Mark Carney, suggested the UK could sink into deflation for a period of time, suggesting it will do all it can to keep borrowing costs low. That dovish tone was enough to convince investors that the UK is a reasonably reliable bet. The last time gilt yields were anywhere near this low was during the height of the euro crisis, in 2012, as investors sought refuge in the UK's relatively safe government debt. But that began to climb as rumours increased that the Bank of England could begin to hike rates.

Mark Carney praised the ECB for the boldness of plans to buy hundreds of billions of Euro’s of government bonds to fight the combination of weak growth and falling prices. He also states that the Eurozone needs more public spending in its poorer areas.

American consumers upped their purchasing in the fourth quarter, just as companies hit the brakes. While the economy grew at a 2.6 percent annualised rate, the gain fell short of the median forecasts and was well below the 5 percent pace in the third quarter.

Cheaper petrol prices and the largest employment increase since 1999 are boosting household confidence, increasing the odds that consumer spending can sustain gains following its biggest advance in almost nine years. At the same time, business investment is cooling as companies such as Caterpillar say plunging oil prices, a rising dollar and slowing growth abroad hurt sales globally.

Consumer spending, which accounts for almost 70 percent of the economy, climbed at a 4.3 percent rate, more than projected and the biggest gain since the first quarter of 2006. Households splurged on clothing, recreation and going out for a spin in the car as sales of gasoline climbed even after taking into account the drop in prices.

comments powered by Disqus

to the free, weekly Asian Voice email newsletter