UK enters recession as GDP drops in 4th Quarter, UK Retail Sales rise. Pound mixed in Forex Trading. | CountingPips Forex Blog

January 23, 2009 - Forex Economic News

UK enters recession as GDP drops in 4th Quarter, UK Retail Sales rise. Pound mixed in Forex Trading.

The United Kingdom Gross Domestic Product fell by more than expected in the fourth quarter of 2008 and signaled that the U.K. economy has entered into recession according to a report by the Office of National Statistics today. The U.K. preliminary estimate showed that Pound mixed in Forex Trading quarterly GDP fell by 1.5 percent in the October through December quarter of 2008 following a decline of 0.6 percent in the third quarter.

Today's GDP release brought the U.K. economy into its first recession since 1991 and the fourth quarter GDP decline marked the sharpest quarterly fall in GDP since the second quarter of 1980. The generally accepted definition of a recession is negative GDP growth for two consecutive quarters and the U.K. joins other major economies such as the U.S. and the Eurozone in recession.

On an annual basis, the fourth quarter GDP fell by 1.8 percent from the level of the fourth quarter of 2007 and follows the third quarter annual decline of 0.3 percent. Today's data surpassed economic forecasts which were expecting the quarterly GDP to decline by 1.2 percent and the annual GDP rate to fall by 1.4 percent.

Contributing to the contraction in GDP was a decline of total production output in the fourth quarter by 3.9 percent after falling by 1.4 percent in the third quarter. Manufacturing declined by 4.6 percent for the quarter after falling by 1.6 percent in the third quarter. Construction activity fell by 1.1 percent after falling just 0.2 percent in the third quarter and total services saw a decline by 1.0 percent in the fourth quarter, doubling the 0.5 percent decline in the third quarter.

UK Retail Sales gain in December to beat forecasts.

Retail Sales data was also released today out of the United Kingdom and showed that retail sales rose much more than expected in December. The UK retail sales data, released by National Statistics, increased by 1.6 percent in December following an increase of 0.3 percent in November. On an annual basis, retail sales increased by 4.0 percent over the December 2007 time period following a 1.3 percent revised annual gain in November. Today's sales data surpassed market forecasts by much more than expected as forecasts were predicting that sales would fall by 0.7 percent in December to register an annual increase of only 1.5 percent.

The non-seasonally adjusted data showed a 1.8 percent annual gain for retail sales in December compared to December 2007. Contributing to the increase in retail sales was a non-seasonally adjusted gain of 2.4 percent in non-food stores and a non-seasonally adjusted increase of 18.7 percent of sales in the non-store retailing and repair sector. The Office for National Statistics cautioned that the non-seasonally adjusted data may be more representive of the actual statistics because special circumstances such as a late 5-week reporting period, deep Christmas discounts and a VAT change may skew the seasonally adjusted data.

British Pound Sterling mixed in Forex Trading versus majors.

The British pound has been mixed today in forex trading against the other major currencies as the pound saw some early declines but has been trading higher into the US afternoon trading session.

The pound is lower versus the US dollar today as the GBP/USD trades at the exchange rate of 1.3701 at 1:03pm EST after opening the day at 1.3752(00:00GMT) and making an intraday low of 1.3503.

The euro is trading slightly higher today versus the pound as the EUR/GBP trades at 0.9424 after opening the day at 0.9408. The pound has declined versus the Swiss franc as the GBP/CHF has fallen approximately 45 pips from its opening rate of 1.5927 to trading at 1.5890.

The pound, meanwhile, is trading slightly lower against the Japanese yen today with the GBP/JPY falling from 121.87 to trading at 121.69. Against the Canadian dollar, the pound has fallen from the 1.7283 opening rate to trading at the exchange rate of 1.6995 CAD per GBP.

EUR/GBP Chart - The Euro gaining today against the British Pound and extending above the 55-day simple moving average.

Today's Forex Chart

tags: UK, GDP, Retail Sales, Pound, Forex Trading

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