U.K Grow Yet Outlook Is Bleak

The week is finally coming to an end, this week though was highlighted by the dollar's weakness which helped push oil prices to hit record highs, and this rise in energy prices is affecting inflation globally and threatening both consumers and businesses.

Both Germany and the Euro Zone reported the purchasing mangers index for May, the PMI manufacturing rose Germany to 53.5 after rising 53.6 back in April and higher than median estimates, while the PMI for services dropped to 53.7 from 54.9 and below the 54.0 expected estimate.

While for the 15-nation economy, PMI manufacturing slowed to 50.5 from 50.7 inline with median estimates, while the services PMI declined to 50.6 from 52.0 and below the 51.7 expected in the markets.

Rising food and energy prices are weighing down on consumers and businesses in the Euro area while the rising Euro is doing the rest, the ECB still see growth in the Euro area though moderating but the outlook remains way better than that in the United States and the United Kingdome, and the ECB accordingly are able to maintain their Hawkish stance to fight skyrocketing inflation.

The Office for National Statistics in U.K reported today that the preliminary Gross Domestic Product estimate for the first three months of this year, the U.K economy grew 0.4% over the quarter unchanged from the previous estimate and inline with the previous estimate, while over an annualized estimate the economy grew by 2.5 percent also unchanged from the previous and inline with median estimates.

Going through the details we can see that investments fell 1.6% after rising 1.8% the previous quarter, while consumer spending rose 1.3% after rising 0.1%, the BOE expected the economy to continue slowing throughout this year, yet the bank seems to have set his eyes on rising inflation…

The BOE are now stuck in a difficult position as prospects of rising inflation would limit the bank's options against downside risks to growth, many members of the MPC have set their eyes on growth even if their worst case scenario suggests the economy might go through contraction, as house prices continue to fall and access to credit is seen to continue tightening…

Global inflation is rising due to the fact that oil and food prices continue to soar, central bankers all around the globe are trying to find their balancing act among growth and inflation, with some expected to go through stagflation while others are seen to go through recession, and both hope that emerging markets alongside China, India, and Russia can weather the storm!

Crown Forex

Posted in: Economy,Finance and Investment,Forex