Tag: GDP

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Recent surprise rise in UK borrowing – deals yet another disappointment for the chancellor

UK borrowing

The latest UK borrowing figures, reveal a significant increase in public sector net borrowing. In December 2024, the UK government borrowed £17.8 billion, which is the highest figure for the month for four years.

This amount was reportedly £10.1 billion higher than the same month last year and exceeded the £14.1 billion forecast by most economists.

The reported rise in borrowing was driven by several factors, including increased spending on public services, benefits, debt interest, and capital transfers. The interest payable on central government debt alone was £8.3 billion, nearly £4 billion higher than the previous year.

Additionally, a reduction in National Insurance contributions following rate cuts earlier in 2024 partially offset the increase in tax receipts.

Chancellor Rachel Reeves faces a challenging fiscal environment, with borrowing costs rising due to lower economic growth, higher public sector wages, and increased benefits payments. The unexpected jump in December 2024’s borrowing highlights the difficulties in balancing the budget and maintaining economic stability. The Chancellor’s budget was one of growth, but employer NI hikes have unravelled her ‘growth’ plan.

Despite the rise in borrowing, government bond prices remained relatively stable, suggesting that traders were not overly concerned by the surge. However, the overall fiscal position remains precarious, with public sector net debt estimated at 97.2% of GDP, the highest level since the early 1960s.

The government has pledged to take a hard line on unnecessary spending and to ensure that every penny of taxpayer money is spent productively.

As the fiscal year progresses, the Chancellor will need to navigate these financial challenges carefully to maintain economic stability and growth.

However, it is anticipated next month, following the January tax income boost, figures will appear favourable for the government, albeit temporarily.

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UK FTSE 100 back in favour as it breaks new highs!

FTSE 100

The FTSE 100, the UK’s premier stock market index, has recently reached unprecedented new highs, marking a significant milestone in the UK financial world.

On 20th January 2025, the FTSE 100 closed at a record high of 8,548, surpassing the 8,500 barrier for the first time.

This achievement is a testament to the resilience and strength of the UK’s largest companies, even amid global economic uncertainties.

Several factors have contributed to this remarkable performance. Firstly, the anticipation of potential interest rate cuts by the Bank of England has fueled investor optimism. Lower interest rates typically reduce borrowing costs for companies, encouraging investment and expansion, which in turn boosts stock prices.

Additionally, the recent rise in oil prices has significantly benefited major oil companies like BP and Shell, which are key components of the FTSE 100.

FTSE 100 reaching new highs – one month chart as of 22nd January 2025 (08:21)

The banking sector has also played a crucial role in driving the index higher. With full-year earnings reports expected soon strong performance from banks could further propel the FTSE 100.

Furthermore, the index’s composition, which includes a substantial number of companies with global operations, has allowed it to benefit from the weaker pound. A weaker pound makes UK exports more competitive and increases the value of overseas earnings when converted back to sterling.

Market analysts are now speculating whether the FTSE 100 could reach the 9,000 mark in the coming months. While this would represent a significant rise from current levels, it is not entirely out of reach given the current momentum and favorable economic conditions.

However, some caution that the index’s rapid ascent may be followed by periods of volatility, especially as global economic conditions evolve.

In conclusion, the FTSE 100’s recent surge to new highs is a reflection of the robust performance of its constituent companies and the broader economic environment.

As investors continue to navigate the complexities of the global market, the FTSE 100 remains a key barometer of the health and vitality of the UK economy.

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China’s fourth-quarter GDP grows at 5.4%

China GDP

China’s economy expanded by 5.4% in the fourth quarter, surpassing market expectations, as a series of stimulus measures propelled the economy to meet Beijing’s growth target

This final-quarter surge helped elevate China’s full-year GDP growth to 5.0% in 2024, with the official target of around 5%.

In December 2024, retail sales increased by 3.7% from the previous year, exceeding forecasts of around 3.5%. Industrial output reportedly grew by 6.2% compared to previous year, surpassing expectations of 5.4%.

Contrast these figures to the UK’s quite pathetic 0.1% growth recently announced.

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UK economy had zero growth between July and September 2024 – bad to worse

UK economic data

Revised official figures indicate that the UK economy was weaker than initially estimated between July and September 2024. The economy experienced zero growth in these three months, down from an earlier estimate of 0.1%.

UK Chancellor, Rachel Reeves reportedly stated that the challenge to fix the economy “after 15 years of neglect is huge,” and October’s Budget would “deliver sustainable long-term growth, putting more money in people’s pockets.”

However, one of the UK’s leading business groups, the CBI, said its latest company survey suggested “the economy is headed for the worst of all worlds.”

The downward revisions will be a setback for Labour, which has prioritised boosting economic growth. It has promised to deliver the highest sustained economic growth in the G7 group of wealthy nations.

Separate figures released last week showed that inflation, the rate at which prices increase over time, is rising again at its fastest pace since March 2024. But it is close to the Bank of England target of 2%

The Bank of England voted to hold interest rates at the last meeting, stating that it believed the UK economy had performed worse than expected, with no growth between October and December 2024.

Businesses have warned that measures announced in October’s Budget, including a rise in employer national insurance and a higher minimum wage, could force them to raise prices and reduce the number new jobs.

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UK economy shrinks unexpectedly for second month in a row contracting 0.1% in October 2024

The U.K. economy contracted unexpectedly in October 2024, according to data from the Office for National Statistics (ONS).

Gross Domestic Product (GDP) fell by an estimated 0.1% on a monthly basis, the ONS said Friday 13th December 2024, attributing the downturn to a decline in production output. 

It marked the second consecutive economic downturn, following a 0.1% GDP decline in September 2024. Sterling declined on the back of these disappointing figures, trading 0.3% lower against the U.S. dollar in early trade.

However, ‘real’ GDP is estimated to have grown 0.1% in the three months to October 2024, the ONS said, compared to the previous three months ending in July 2024.

In a statement on Friday 13th December 2024, U.K. Finance Minister Rachel Reeves reportedly conceded that the October figures were ‘disappointing,’ but defended the government’s economic strategies. I expect the chancellor would have been quick to own the success had the GDP improved – especially after the ‘for growth’ budget.

The economy has grown just once over the past five months and is 0.1% lower than before Labour won the election. That may suggest it’s not just the Budget that is holding the economy back. Instead, the drag from higher interest rates may be lasting longer than was calculated.

Either way, be it budget or inflation pressure – the UK economy isn’t growing.

UK GDP January 2022 – October 2024

Note: preliminary ONS figures may be revised in future assessments

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Germany’s inflation climbs to 2.4%

Germany data

In October 2024, Germany’s inflation rate rose to 2.4%, as per the preliminary figures from the Federal Statistical Office, Destatis

This increase defied the expectations of analysts, who had predicted a 0.1% decrease, thus narrowly preventing Germany from entering a technical recession, defined by two successive quarters of economic decline.

The inflation rate is adjusted for consistency across the eurozone.

Following this, Destatis released a preliminary report earlier on Wednesday 30th October 2024 showing that Germany’s GDP grew by 0.2% in the third quarter, in comparison to the preceding three months.

Previously, inflation had fallen to 1.8% in September 2024, after reaching the European Central Bank’s target of 2% in August.

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U.S. economy grew at 2.8% in the third quarter -below expectations

GDP U.S.

The U.S. economy experienced another growth spurt, albeit slightly underwhelming, growth period in the third quarter, driven by strong consumer spending that has surpassed slowdown expectations

The gross domestic product (GDP), which gauges all goods and services produced from July through September 2024, rose at a 2.8% annualised pace, as per the inflation and seasonality-adjusted Commerce Department report released Wednesday 30th October 2024.

This report verifies that the U.S. growth persists, notwithstanding high interest rates and persistent concerns that the surge of fiscal and monetary stimulus, which supported the economy during the Covid crisis, might not suffice to maintain growth.

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Euro zone economy grows 0.4% in third quarter – better than expected

Euro Zone GDP

The euro zone’s economy expanded by 0.4% in the third quarter, according to flash figures released by the European Union’s statistics office (Eurostat) on Wednesday 30th October 2024.

Economists had anticipated a growth of 0.2%, following a 0.3% increase in the second quarter.

Analysts predict that euro zone growth may pick up cautiously in the upcoming months, in light of lower interest rates and subsiding inflation.

At its October 2024 meeting, the European Central Bank (ECB) reduced rates for the third time this year, following a final reading of September’s EU headline inflation at 1.8%.

The ECB pointed to sustained indications of sluggish activity in the euro area as a significant reason for the rate cut in October.

Markets have completely factored in another 0.25% reduction by the ECB for its final meeting of the year in December 2024.

Germany, the largest economy in the euro zone, reported an unexpected 0.2% growth in the third quarter, as per figures released on Wednesday 30th October 2024. This growth helped the country steer clear of the recession predicted by some economists.

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China’s industrial profits have plummeted at the sharpest rate since the pandemic

Factory workers

In September 2024, China’s industrial profits fell at the fastest rate since the pandemic of 2020 began, according to China’s National Bureau of Statistics

Following a 17.8% decrease in August 2024, profits in September 2024 plummeted by 27.1% from the previous year, reportedly the most significant drop since the 34.9% decline in March 2020, according to analysis.

In response, Chinese officials have intensified efforts to stimulate growth.

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China reports GDP growth of 4.6% – above expectations

China data screen

China’s National Bureau of Statistics announced on Friday that the GDP growth for the third quarter was 4.6% year-on-year, marginally above the 4.5% forecasted by economists. But slightly lower than the second quarter’s year-on-year growth of 4.7%.

In terms of quarterly growth, the third quarter experienced a 0.9% increase, which is higher than the 0.7% seen in the previous quarter.

Additional data released on Friday 18th October 2024, including retail sales and industrial production, also exceeded expectations, indicating a positive outlook for the world’s second-largest economy.

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UK economy grows 0.2% in August 2024

UK GDP economic data

In August 2024, the U.K. economy experienced a 0.2% growth on a month-on-month basis, according to preliminary figures released by the Office for National Statistics on Friday 11th October 2024.

But there is a warning of a potential UK slowdown despite the August pick-up.

The gross domestic product (GDP) matched the 0.2% growth anticipated by economists.

Over the three months leading to August, Britain’s economic growth also registered a 0.2% increase, which was marginally below the expectations of economists.

A rebound in construction and a robust month for accountancy, manufacturing, and retail sectors contributed to a 0.2% boost in the economy, following a stagnation in growth over the prior two months.

However, the Office for National Statistics (ONS) noted that economic growth has been weaker relative to the first half of the year and of a potential slowdown.

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UK economic growth revised down to 0.5%

UK growth lower

The UK’s economic growth for the period between April and June 2024 was lower than initially estimated, as reported by the ONS

The Gross Domestic Product (GDP), which quantifies the economic activity of companies, governments, and individuals within a country, increased by 0.5%, a revision from the preliminary figure of 0.6%.

Both the manufacturing and construction sectors experienced greater declines than initially calculated.

This information comes to light as the Labour government, which prioritises economic growth, gears up to present its first Budget at the end of October 2024.

The Office for National Statistics (ONS), the publisher of these statistics, noted a significant 3.1% decrease in the production of transport and related equipment during this quarter, following a sustained period of expansion, a stark contrast to the initially estimated 0.7% decrease.

The ONS indicated that this downturn could be attributed to factories scaling back production in anticipation of the transition towards electric vehicle manufacturing.

Additionally, the construction sector saw a downturn, continuing the trend of decreased new home construction.

However, the ONS said that the outlook was improving.

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UK economy flatlines for second month in a row

UK economic health

The UK’s economy did not experience growth in July 2024, continuing the stagnation from June 2024, as indicated by official data

Analysts had anticipated a modest growth of 0.2% for July. However, the Gross Domestic Product (GDP) fell short of the expectations set by economists surveyed by Reuters, who had predicted a 0.2% increase. Additionally, the country experienced no GDP growth in June 2024.

In July 2024, Britain’s predominant services sector experienced a slight increase of 0.1%, while production and construction outputs declined by 0.8% and 0.4%, respectively.

The UK’s economic growth rose by 0.5% in the three months leading up to July 2024, which was marginally below the expectations of economists and the 0.6% growth seen in the second quarter ending in June.

The services sector received a boost from a summer filled with sports events, including the Euros and the Olympics, despite the downturn in production and construction outputs.

The absence of growth for another month poses a significant challenge for the new Labour government, which has prioritised economic stimulation.

Despite no growth in July 2024, the Office for National Statistics (ONS) noted that the services sector showed strength over the last three months as a whole. Growth was primarily driven by computer programmers and the health sector, which bounced back from June’s strike action.

However, there was a decline in output from the advertising, architecture, and engineering sectors, according to the ONS. Car and machinery firms experienced a particularly challenging month.

While the ONS tracks gross domestic product (GDP) monthly, greater emphasis is placed on the three-month trend. Monthly figures, being preliminary estimates, are often subject to minor revisions as more data becomes available.

UK economy flatlines in July 2024

UK economy flatlines in July 2024 (Graph and Data ONS)
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Does the stock market reflect the state of the U.S. economy?

Stock market health monitor

The stock market is often seen as a barometer of economic health, but its relationship with the broader U.S. economy is more nuanced than it might appear.

Although there are links between the two, they do not always correlate. The intricacies of this relationship and its implications for investors and the general public are multifaceted.

The stock market – A snapshot of investor sentiment

The stock market is largely a reflection of investor sentiment and their expectations for future economic performance. When investors feel optimistic, stock prices generally increase. On the other hand, when they are pessimistic, stock prices are likely to decrease. Because the market is driven by sentiment, it can react to factors that don’t immediately affect the real economy, like geopolitical events, interest rate changes, or corporate earnings announcements.

Economic indicators: The real economy

The well-being of the U.S. economy is often assessed using various indicators such as Gross Domestic Product (GDP) growth, unemployment rates, consumer spending, and inflation. These metrics offer a broader perspective on the economic climate. For example, an expanding GDP coupled with low unemployment usually indicates a robust economy, despite any fluctuations in the stock market.

Divergence between the stock market and the economy

Occasionally, the stock market and the economy may move in different directions. For instance, during the COVID-19 pandemic, the stock market swiftly recovered from an initial downturn due to extraordinary fiscal and monetary stimulus measures. In contrast, the wider economy’s recovery was more protracted, marked by persistent high unemployment and substantial disruptions across numerous industries.

Likewise, the stock market might fall even amidst positive economic indicators. This occurs when investors foresee impending difficulties, such as possible increases in interest rates or geopolitical conflicts, that could affect corporate earnings.

Short-term vs. long-term perspectives

The stock market frequently responds to short-term factors and investor behaviours, such as speculation and market sentiment, leading to volatility that may not align with the underlying economic fundamentals. Conversely, economic indicators generally offer a more long-term perspective on the economy’s health.

The broader impact of the stock market

Although the stock market’s performance can influence the economy via wealth effects and corporate investments, it is not the only indicator of economic vitality. The performance of the stock market is significant to many U.S. citizens, especially those with investments through retirement plans.

However, the real economy, as measured by employment, production, and consumption, often has a more direct impact on people’s daily lives.

Conclusion

In conclusion, although the stock market is linked to the U.S. economy, they do not always move in tandem. The stock market reflects investor sentiment and anticipations for the future, yet it may not fully represent the present economic conditions.

Hence, for a thorough assessment of economic health, it is crucial to evaluate various economic indicators in addition to the performance of the stock market.

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Is the ‘eagerly anticipated’ Fed interest rate cut (due in September 2024) – too little too late?

Federal Reserve

Is the U.S. economy already weaker than the headline data suggests and should the U.S. Federal Reserve already be easing?

In the U.S. recent data (Friday 30th August 2024) showed the personal consumption expenditures (PCE) price index, the Federal Reserve’s favored measure of inflation, ticked up 0.2% last month, as expected. The data seems to back a smaller rate cut.

The question of whether the economy is weaker than headline data suggests and if the U.S. Federal Reserve should already be easing is complex.

The gross domestic product (GDP) increased at an annual rate of 3% in Q2 of 2024, which is a positive indicator. However, the U.S. current-account deficit widened, and personal income and outlays show mixed signals with a slight increase in personal income but a higher increase in personal outlays.

Inflation remains above the Federal Reserve’s 2% target but well below the pandemic-era peak. These factors suggest that while there are positive aspects to the U.S. economy, there are also challenges that may warrant caution from the Federal Reserve.

Is the market too focused on forecasting the size of any possible upcoming cut? “The question no one has asked yet is why is the policy rate is still at 5.5% when inflation is down to almost 2.5%? It would most likely be an error to do a ‘bigger’ rate cut in this kind of environment with all the uncertainty that the U.S. economy is facing.

Jobs data trends are also an important factor and play a major role in decision making. Company performance and future performance predictions are critical to help judge policy direction.

Decisions on monetary policy easing would be based on a comprehensive analysis of all economic indicators and trends.

If the FED go BIG on a rate cut some say it could be very dangerous and spook the markets.

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People leave New Zealand in record numbers seeking better opportunities

Leaving New Zealand

Record numbers of people are leaving New Zealand as unemployment increases, interest rates stay elevated, and economic growth remains weak, according to government statistics.

Statistics New Zealand’s data released on Tuesday 13th August 2024 indicates that 131,200 individuals left New Zealand in the year ending June 2024, tentatively the highest annual figure on record. Approximately one-third of these individuals were bound for Australia.

Although net migration is still high, economists anticipate a decline as fewer foreign nationals show interest in moving to New Zealand due to the weaker economy.

The statistics reveal that 80,174 of those who left were citizens, nearly twice the number that left before the Covid-19 pandemic.

During the pandemic, New Zealanders abroad returned in large numbers, spurred by the government’s response to the crisis.

However, for some, the appeal of the 5.3 million-strong country has waned. Economists note that New Zealanders, vexed by living costs, high interest rates, and limited job prospects, are considering relocation to Australia, the UK, and other countries.

New Zealand’s economy is floundering following the central bank’s 521 basis point increase in cash rates, the most substantial hike since the official cash rate’s inception in 1999.

The economy grew by only 0.2% in the first quarter, unemployment climbed to 4.7% in the second quarter, and inflation continues to be high at 3.3%.

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UK economy grows 0.6% in second quarter 2024

UK GDP growth

The U.K. economy grew by 0.6% in the second quarter of 2024, the Office for National Statistics said Thursday 15th August 2024, in line with expectations.

The data release follows an expansion of 0.7% in the first quarter of 2024.

Economic growth was flat in June, in line with forecasts.

The UK economy has shown modest yet consistent growth each month this year, marking an exit from a mild ‘technical’ recession. Additionally, GDP remained unchanged in April, influenced by wet weather that impacted retail sales and construction activity.

Growth was led by the services sector, in particular the IT industry, legal services and scientific research.

ONS data for UK economic growth
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The Dow closed 650 points higher Friday 26th July 2024 – lifted by a positive inflation data

U.S. stock charts and flag

On Friday 26th July 2024, U.S. stocks surged, and Wall Street concluded a volatile week on an upbeat note as investors considered the latest U.S. inflation data.

The Dow Jones Industrial Average soared 654 points to settle at 40589. The S&P 500 climbed to 5459 while the Nasdaq Composite advanced around 1% to close at 17357.

Dow Jones as at: 26th July 2024 – one day chart

Dow Jones as at: 26th July 2024 – one day chart

The upward movement was attributed to a mix of oversold conditions, a U.S. GDP report on Thursday 25th July 2024 that exceeded expectations, and the anticipation that the Federal Reserve will start reducing rates in response to the economy’s demonstrated resilience.

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UK national debt as a percentage of GDP is now 99.5%

UK Debt to GDP percentage

Highest ratio since the 1960’s and even higher than that reached during the Covid pandemic of 2020.

The UK’s national debt has reached its highest level since 1962.

Official figures from the ONS show that the total government debt amounted to 99.5% of the economy’s value in June 2024, surpassing the peak levels experienced during the coronavirus pandemic.

The current debt level is comparable to that last observed in the early 1960’s.

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China manufacturing and Japan’s GDP contracts – Asia markets mixed

Economic data

Over the last weekend of June 2024, China released its official PMI figures, with the manufacturing PMI remaining at 49.5, the same as in May 2024, indicating a second consecutive month of contraction.

On Monday 1st July 2024, Japan adjusted its first-quarter GDP figures, showing a contraction of 2.9% year-on-year, a revision from the previously reported 1.8%.

Asia markets started the second half 2024 mixed as investors assessed June business activity data from China as well as Japan’s GDP revision.

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Nvidia rebounds after half a trillion market cap slump

Hot AI

To put this figure into some perspective, the loss is comparable to the GDP output of a small country, such as Norway, Singapore, or the UAE, for example.

Global semiconductor stocks experienced volatility on Tuesday following a decline in Nvidia’s shares from the previous trading sessions.

Shares of chip firms in Europe and Asia fell in early trade as investors reacted to Nvidia losing more than $500 billion in market capitalization over three trading days. Some of the stocks recouped losses, however, as shares in the U.S. chipmaking giant recovered around 6 – 6.5% as of Tuesday 25th June 2024.

This follows a significant drop in Nvidia’s share value, which fell 13% over three consecutive sessions from the record highs achieved on Thursday 20th June 2024.

On Monday 24th June 2024, Nvidia’s stock closed down 6.7%, marking its second-largest decline of the year, yet the shares began to recover in early trading on Tuesday 25th June 2024.

Last week, the company surpassed Apple and Microsoft to become the most valuable U.S. company, achieving a market capitalization of over $3.4 trillion. However, by the end of Monday, Nvidia’s market value had declined by more than $540 billion from its intraday record on Thursday 20th June 2024.

Nvidia reported that the demand for its highly sought-after artificial intelligence graphics processing units (GPUs) continues to be strong.

Companies such as Microsoft, Google, Amazon, and Meta are investing billions of dollars in these chips to enhance their data centres and cloud services.

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UK GDP flatlines – not so helpful for Sunak and his election campaign

UK GDP slows

In April 2024, the U.K.’s economic growth came to a standstill, figures released on Wednesday 12th June 2024 indicated, putting a pause on the subdued recovery from the previous year’s recession just weeks before the UK election.

Analysts had anticipated growth a levelling off following a 0.4% expansion in March 2024.

Over a longer period however, the outlook was slightly more positive, with a 0.7% increase in gross domestic product (GDP) in the three months leading up to April 2024.

The construction sector saw a 1.4% decrease, marking its third consecutive decline, and production output fell by 0.9%. However, the U.K.’s dominant service sector witnessed growth, with a 0.2% increase.

The UK had managed modest growth each month in the first quarter of the 2024 as the country emerged from a mild short technical recession.

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IMF upgrades China’s growth forecast to 5%

China GDP

On Wednesday 29th May 2024, the International Monetary Fund increased its projection for China’s economic growth this year to 5% from the previous 4.6%, citing robust first-quarter figures and recent policy actions.

This revision reportedly came after the IMF’s routine evaluation visit to China. The institution now predicts that China’s economy will expand by 4.5% in 2025, an increase from the earlier estimate of 4.1%.

However, by 2029, the IMF expects China’s growth to slow to 3.3%, influenced by an aging demographic and a decline in productivity growth. This is a decrease from the previous medium-term growth forecast of 3.5%.

China’s economy experienced a stronger-than-anticipated growth of 5.3% in the Q1, bolstered by robust exports. Meanwhile, April’s data indicated that consumer spending continued to be weak, although there was a resurgence in industrial activity.