U.K’s Economic Fundamental Weakens in March; Pound Dips

Heightened economic uncertainty coupled with the ‘Beast from the East’ storm weighed on U.K economic growth in the month of March.

The construction Purchasing Managers’ Index contracted to 47 in March, down from 51.4 recorded in February, while the manufacturing PMI remained unchanged at 55.1 and services sector grew at 51.7, also down from 54.5 filed in February, the IHS Markit reported.

While some experts have attributed the weak numbers to the storm that disrupted activities across sectors during the month, the report also showed consumer demands were subdued and business optimism didn’t reflect strong confidence when compared to the last months of 2017. Meaning other factors like weak new business investment, waning consumer spending, Brexit uncertainty and sluggish wage growth may have started hurting growth in the U.K.

Still, the high inflation rate amid falling pound is expected to support the Bank of England possible rate increase in May. Especially now that the Brexit proposed deal is receiving positive reviews.

However, the economy is projected to grow at a slower pace in the first quarter. The IHS Markit projected 0.3 percent growth rate, lower than the 0.4 percent recorded in 2017 first quarter.

The pound dipped further against the U.S. dollar, dropping below the $1.4 price level to 1.3987. The lowest in almost two weeks.

A sustained break of 1.3921 support should affirm bearish pressure. However, the uncertainty surrounding U.S. trade-war with China, NAFTA, and internal politics continued to hurt US dollar attractiveness. Therefore, caution is advised.

Guest post by Samed Olukoya, the owner of Investors King.


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