Sterling Tumbles as UK Economy Grinds to a Halt
August 22nd, 2008Via: Financial Times:
Sterling tumbled on Friday as official figures showed UK economic growth ground to a halt in the second quarter of this year, strengthening fears the economy is already contracting.
The Office for National Statistics revised its first estimate of second quarter growth by more than expected as it said output had been flat quarter on quarter, the lowest figure since the second quarter of 1992.
Gross domestic product was 1.4 per cent higher than in the second quarter of 2007, the lowest year-on-year growth rate since the end of 1992.
Economists had anticipated a smaller downwards revision to the ONS’ initial estimate of 0.2 per cent quarter on quarter growth, and its scale and broad-based nature may raise hopes of an eventual cut in interest rates.
However, the Bank of England had already forecast output would stagnate for the next year, and minutes of the monetary policy committee’s last meeting suggested fears of persistently high inflation could keep rates on hold for some time.
“Even in our gloomy scenario for growth, we would have not expected such an abrupt loss of momentum – and we think the Bank of England would be also surprised,” said Chiara Corsa at Unicredit.
This isn’t surprising. The moderate rebound in the UK economy in recent history probably had more to do with North Sea petroleum, which is now on the downside of its depletion-arc, than it ever had to do with Margaret Thatcher’s “New Enterprise Culture”.