Daily Market Report - 27/11/2014

GBP
The Office for National Statistics yesterday said the UK economy grew by 0.7% in the third quarter of this year. This figure was in line with the initial estimate last month and means GDP expanded by a healthy-looking 3% over the last year. However, further details of expenditure in the economy has worried several experts. The ONS found that business investment fell by 0.8% during the quarter, signalling that firms cut back on spending.

Instead, it was consumer spending (up 0.8%) and government expenditure (up 1.1%) that drove growth. The ONS also reports that Britain’s trade balance deficit widened in the last quarter, from £8.9bn in Q2 2014 to £11.2bn in Q3 This is because exports declined by 0.4%, while imports increased by 1.4%. 

There has been talk recently about the need to re balance the economy, however the data shows that consumer spending is continuing to help drive the recovery. To compound this troubles in the eurozone, which only grew 0.2% last month, may mean the UK remains too dependent on consumer spending rather than exports

Yesterday, Bank of England policy maker Kristin Forbes told MPs that people have been dipping into their savings to fund spending; that’s why real wage growth is desperately needed.

USD
Data showed yesterday that the number of US citizens signing on for unemployment benefit has hit the highest level since September. The Labor Department reports that the initial claims total rose to 313,000 last week, a gain of 21,000.

Separately, US durable goods orders have beaten forecasts, with a rise of 0.4% last month. That is much stronger than the 0.6% fall which was forecast. However, the increase was mainly due to transportation orders - strip out orders for aeroplanes and engines, and durable goods were actually down by 0.9%.

US consumer spending only rose by 0.2% last month, missing forecasts of a 0.3% rise.The America’s Commerce Department also reported that personal incomes rose by 0.2% in October, only half as fast as expected.

Consumer sentiment was also up in the US yesterday. US consumer sentiment rose in November to its highest level in more than seven years. The Thomson Reuters/University of Michigan’s final reading came in at 88.8, up from 86.9 in October but below the preliminary estimate of 89.4. 

Meanwhile the pace of business activity fell sharply in Chicago in November. The ISM Chicago business barometer fell from 66.2 in October to 60.8, below expectations of a figure of 63.

Today

The main data which could move the EUR today is the German CPI figures. If as expected they come in below the forecast of 0.8% to 0.6% we could expect to see EUR weaken off as this add to the fears of deflation throughout the Eurozone. As a result it could push Mario Draghi to add further stimulus to the struggling European economy

Key Announcements:

08:55 - EUR : German Unemployment (Nov) expected to stay unchanged at 6.7%
13:00 - EUR : Consumer Confidence expected to be higher at 8.5 from 8.6
13:00 - EUR : German Inflation (Nov) expected to rise from -0.3% to 0.1%

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