While the headline growth rate has remained unchanged in this second estimate, concerns over the strength of trade, business investment and the services industry have soured the economic outlook.
The GBP NZD exchange rate has therefore fallen -0.3% to trend in the region of 1.9321.
Bad News for UK Trade and Investment Weakens Pound Sterling (GBP) Exchange Rates
A second estimate of UK GDP during the third quarter has confirmed that growth remained sluggish, with the initial estimates of 0.4% on the quarter and 1.5% on the year upheld.
Some of the other figures included in the latest report from the Office for National Statistics (ONS) proved lower-than-expected, however, increasing concerns surrounding the outlook for the UK economy.
The index of services, which chronicles the performance of the UK’s vital services sector, saw growth hold steady at the previous upwardly-revised rate of 0.1%, defying predictions of an uptick to 0.2%.
Year-on-year investment during the third quarter slowed past anticipated levels from 2.5% to 1.3% instead of to 1.4%.
A positive recovery for the Confederation of British Industry (CBI) retail sales balance has failed to support the Pound as, like the day’s GDP data, the finer details of the report contain some worrying information that bodes ill for future progress.
October’s balance had fallen to -36 – the worst result since March 2009, when the country was in recession – but things have picked up this month; 39% of shops reported rising sales volumes, while 13% revealed declining sales, leaving a balance of +26%.
But markets are concerned that retailers are laying off staff and are fretting that conditions next year will be tough.
CBI Chief Economist Rain Newton-Smith warned; ‘It’s great to see retail sales rebound this month after a big dip, but let’s be clear: our high streets are not out of the woods.’
‘Ahead of the crucial run up to Christmas, the weaker pound has pushed up prices and retailers are nervous about business conditions and are trimming their workforces.’
FOMC Minutes Weigh on New Zealand Dollar (NZD), but Retail Sales Provide Support for ‘Kiwi’
A mixed reception to the minutes of the US Federal Open Market Committee’s (FOMC) 1st November meeting has kept appetite for the New Zealand Dollar (NZD) muted today.
Markets were disappointed to see that the FOMC remains divided over the outlook for inflation in the United States, but there were still enough hints from policymakers to suggest another round of tightening is set for the December gathering.
This meant the short-term outlook for the high-risk ‘Kiwi’ remains gloomy, although better-than-expected retail sales figures and weakness in the Pound have allowed the New Zealand Dollar to make strong gains.
Third-quarter sales excluding inflation grew 0.2% after the 1.8% expansion seen in the second-quarter; slightly better than the forest of 0.1%, but still representing the weakest levels of consumer spending in two years.
Currency Forecast: New Zealand Trade Balance Data to Push GBP NZD Exchange Rates Lower?
Tonight’s New Zealand trade data for October could fuel additional NZD gains, given that economists are expecting to see an improved deficit.
The shortfall between export volumes and import volumes is expected to have shrunk last month, bringing the trade deficit down from -NZ$1.14 billion to -NZ$760 million.
Given that the GBP/NZD exchange rate is already under pressure from the New Zealand Dollar, the latest economic data could extend GBP/NZD losses.
There is no further UK data set for release on Thursday and Friday could be a quiet day for GBP/NZD trading; New Zealand has no ecostats due for publication and the UK calendar holds only the BBA loans for house purchase report for October.