British Pound Struggles as UK GDP Growth Slows BUT Outlook Remains Steady
- Written by: Gary Howes
Pound sterling conversion values are lower following the release of the first edition of Q3 2015 GDP data which missed analyst expectations.
The data read at 0.5%, a poll of leading economists were forecasting a reading of +0.6%, just a shade lower from the mid-year release of 0.7%.
The miss is not a large one but it does confirm that economic growth is decelerating.
The pound exchange rate complex is predictably lower on the miss but don't expect this number to be a major game-changer. Indeed, research shows that sterling is less responsive to individual data readings than is historically the case.
Currency traders will use the GDP data as a useful reality check on the extent of the recent slowdown in economic growth.
PMI data point to a fairly sharp deceleration in UK growth over recent months and this has now been confirmed by official numbers.
"The lacklustre GDP figures revealed today should come as little surprise. A relatively strong pound, coupled with a wounded Chinese economy, has dampened demand for exports," says Dennis de Jong at UFX.
Latest Pound/Euro Exchange Rates
  | Live: 1.146▲ + 0.15%12 Month Best:1.2162 |
*Your Bank's Retail Rate
| 1.107 - 1.1116 |
**Independent Specialist | 1.13 - 1.1345 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
It would be wrong to place too much emphasis on the role of manufacturing in GDP data as the UK economy is a services economy - services account for 75% + of UK economic activity.
As such talk of steel factory closures is of little consequence.
"Osborne will now be hoping that Brits continue to spend in the run up to Christmas, like they have done for the Rugby World Cup, to pump life back into the economy," says de Jong referencing the robust consumer sentiment in the UK which will likely keep economic activity propped up over coming months.
The big question for growth then is whether global economic worries spread into UK consumer and corporate spending plans.
"We see little sign of that so far, and with the worries seeming to fade a little in recent weeks we still look for growth to return to a 0.6%/0.7% qoq pace through next year," argues Robert Wood, UK Economist with Bank of America Merrill Lynch.
The pound slipped against both the dollar from GBP/USD 1.5350 to 1.5310 and the euro from EUR/GBP 0.7190 to 0.7210.
"However, this should not be of great concern, as the pace of growth is still solid," says Asmara Jamaleh at Intesa Sanpaolo in Madrid.
