U.K. Growth Data Goes Under Scope: Economy

U.K. Growth Data Goes Under Scope: Economy

Traders will be closely watching growth data from the royal economy after it shrank for three consecutive quarters, however a consensus believes the situation won`t be worse and the euro area`s largest economy could gain traction in the three months through September.

In fact, bad data continue to be hurdled from the U.K. economy, confirming each day the ongoing slowdown and the worse is yet to come amid the deepening debt crisis in the euro area and the government`s recent efforts to shave the budget deficit and spur U.K. growth.

The U.K. economy probably rebounded in the third quarter of 2012, expanding a soft 0.6 percent, compared with 0.4 percent contraction a quarter ago. From a year ago, the gross domestic product probably steadied at an annual rate of 0.5 percent of contraction.

Manufacturing and services in the U.K. contracted in October, unemployment rate from July to September remained elevated at 7.9 percent though it eased from 8.1 percent, while annual inflation rates in the U.K. eased unexpectedly to 2.2 percent from 2.5 percent.

The government is scrambling to revive the royal economy, but there is only one door, the door of austerity! The toughest spending cuts have definitely helped the government inch closer to its deficit reduction target but at the same time, slapped economic growth!

Furthermore, exports continue to be risked by the U.K. largest trading partner, the euro area, suffering a debt havoc as well the slowdown in the global economy, thus the Bank of England is seen adding to monetary stimulus if the U.K. recovery loses huge momentum.

The BoE and its Monetary policy Committee are concerned about the spreading weakness in global economic recovery, and somehow believe recent positive signs won`t necessary persist, thus additional monetary stimulus is more likely if these positive signs wane.

Mervyn King, Governor of the BoE said Tuesday GDP data may confirm a "zig-zag" pattern of recovery in the U.K. that is likely to continue, but he said "the storm clouds coming from the euro area have not yet lifted," and "China, India and Brazil... are all slowing."