UK Economy Expands: Is a Rate Cut Less Probable?



UK economy expands

The United Kingdom’s economy expanded. The GDP rose by 2.2% on an annual basis in 2Q16—from 2% growth in the previous quarter. The rise in the United Kingdom’s GDP was primarily driven by an expansion in the industrial and services sector. Construction activity, which contributes greatly to the economy, exhibited a fall during the quarter. On a quarterly basis, the United Kingdom’s (EWU) GDP increased by 0.6%—compared to the previous quarter’s growth of 0.4%. The likelihood of a cut in interest rates by the Bank of England became less probable. This caused weakness in the pound sterling against the US dollar on Wednesday. The currency pair fell to a low of 1.3070 on July 27 after the GDP release.

Article continues below advertisement

German GfK consumer climate falls slightly

The GfK consumer climate for Germany (EWG) was impacted by a fall in income and economic outlook following the United Kingdom’s vote to exit the European Union (EZU) (FEZ). It released at 10.0 for August—compared to 10.1 for July and estimated forecasts of 9.9. On the other hand, import prices in Germany fell 4.6% on an annual basis in June—in line with expectations and the previous month’s contraction of 5.5%. On a monthly basis, German import prices rose 0.5% in June—compared to a 0.9% increase in May.

Swedish trade surplus falls, business confidence rises

The trade balance released on a surplus note at 1.8 billion Swedish krona in June—compared to a trade surplus of 6.3 billion Swedish krona in the previous month. While imports fell by 0.3% in June, exports fell by 4%. Business confidence in the Swiss economy increased to 105.3 in July—compared to 104.4 in June. It was driven by a positive sentiment in private services and construction. However, the manufacturing and retail sectors exhibited a fall in confidence in July. Consumer confidence in Sweden (EWD) fell to 95.2 in July—compared to 98.5 In June.


More From Market Realist