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U.K. Revised GDP Actual -1.9%, Expected -1.9%, Previous -1.9%
Release Explanation: Gross Domestic Product (GDP) determines the total worth of all goods and services produced by the economy. GDP is the broadest measure of activity and the primary gauge of the economy's health. “To foreign investors, a strong economy is viewed favorably as it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy,” TheLFB-Forex.com Trade Team said.
TheLFB-Forex.com Trade Desk Thoughts: The revised GDP showed that the economy contracted by 1.9%, as the preliminary release showed. From the first quarter of 2008, the U.K. economy has contracted a whopping 4.1%.
Production output dropped a massive 5.3% in the first quarter, retaining the strong contraction pace as in the previous quarter. Manufacturing output contracted 5.5% from the previous quarter, while construction output fell by 2.4%.
Service output contracted 1.2% in the first quarter, less than the industrial side of the economy. The largest contribution to the service’s output decline came from distribution and business services.
Household expenditure fell by 1.2% and is now 2.8% lower than the first quarter of 2008, being the biggest quarterly decline since the 1980’s. Government final consumption expenditure rose by 0.3%. Compensation of employees at current prices fell by 1.1%, the biggest drop since records first begin, in 1955.
“The current 1.9% quarterly contraction is the biggest over the last few decades. According to the Bank of England estimates, the downturn will continue in the second part of 2009. Inventories shed 0.6% of the 1.9% decline, showing that business owners are reducing their operations.” TheLFB-Forex.com Trade Team said. “Following the poor macroeconomic data flowing out of the U.K., together with a high deficit, the S&P downgraded the U.K.’s rating to negative yesterday”
Forex Technical Reaction: The GDP report failed to move the market since the numbers were pretty much expected. For now, the pound trades below Friday’s opening level, declining for the first time in the last five days of trading
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