Mixed news on the state of the UK economy yesterday as the Office for National Statistics (ONS) reported yesterday that UK public borrowing has fallen to £120.6 billion over the last financial year, £0.3 billion lower than the previous year’s total of £120.9 billion.
The news was a boost for Chancellor George Osborne who has been heavily criticised of late over his strict austerity measures by amongst others the International Monetary Fund.
On a more negative note, the Confederation of British Industry’s (CBI) reported yesterday that UK manufacturing orders fell more than expected in April as home demand declined to its lowest reading since October 2010.
Stephen Gifford, CBI Director of Economics stated “This quarter was a mixed bag for manufacturers, with new orders disappointing because of a decline in domestic demand, but output did increase. Although weaker sterling has eased concern about international competitiveness, manufacturers highlight the potentially chilling effect of political and economic instability abroad on export orders, such as the Cyprus crisis."
However, the CBI data showed that output is expected to rise and manufacturers’ optimism has improved of late.
The euro was hit yesterday by worse than expected German data, falling to a two week low against the US dollar. The preliminary reading for Germany’s composite PMI, fell to 48.8 in April from 50.6 in March. A reading below 50 indicates a contraction in activity.
This led to speculation that the European Central Bank could cut interest rates as early as its May meeting.
The markets were also spooked by a false tweet on the Associated Press page that there had been an explosion at the White House and President Barack Obama had been injured. The news sparked a sell-off in the stock markets and increased safe haven flows safe haven flows into the US dollar.
The Associated Press later confirmed that its Twitter page had been hacked into.
In the US, the US Commerce Department reported that new US home sales rose by 1.5% in March to an annual pace of 417,000 units compared to 411,000 in February. New home sales for March came in just above the consensus estimate of 416,000 units.
Data shows that a low inventory of affordable existing properties are driving up home prices and increasing the demand for new homes.