The Office for national statistics (OFNS) latest figures for construction data showed that the decline in the sector slowed suggesting a tentative possibility that the country’s situation could be on the verge of a turnaround. Construction activity fell by 3.9% a figure that is a lot better than the predicted decline of 5.2%. The decline in the construction sector is often seen as the key reason for weak GDP data but this smaller decline in construction output points to an upward revision of 0.1 percentage points. Together with an upwardly revised industrial production, the drop in GDP looks now 0.2 percentage points smaller than so far estimated.
Brian Hilliard of Societe Generale told the Daily Telegraph: “It’s welcome to see construction data that suggests there will probably be a smaller fall in GDP. The inflation pressures in producer price indices are more muted so the inflation fall should continue. But it still takes you to a -0.5 percent fall in GDP, which is a pretty poor figures but we’ll take any good news where we can get it,” he added. The better than expected Data will now see the OFNS revise its GCP figures, potentially showing that the UK is not in as bad a position as was thought.
Elsewhere the Bank of America said that it expects the Euro crisis to get worse before it gets better predicting that Spain and Italy will go to Brussels begging for a bailout. It also predicts that Greece will remain in the Eurozone despite testing the patience of the rest of the Eurozone members.
A bank spokesman said; “Our hypotheses is that Spain and Italy will ask for support pushed by markets, with Spain getting an MoU with stricter monitoring and conditionality than Italy, because of the Spanish banking sector issue. Initially markets would rally but, in our view, ECB interventions would remain modest, with uncertainty likely to prevail ahead of the Italian elections. Our central scenario for Greece remains that there is no clear cut exit, but that further measures will be taken to prepare for the rising probability of an exit in the medium term.”
The European central bank cut its growth forecasts for both 2012 and 2013 predicting a 0.3% contraction in 2012, although remarkably they are predicting a 0.6% increase in growth down from its previous estimate of 1%.
The Pound to Euro exchange rate is currently trading at 1.271
The Pound to US Dollar exchange rate is currently trading at 1.560
The Pound to Australian Dollar exchange rate is currently trading at 1.483
The Euro to US Dollar exchange rate is currently trading at 1.227
The Euro to Pound exchange rate is currently trading at 0.786
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