The pound continued to slip from recent high’s yesterday despite some decent economic data that continue to paint the picture of a sustained economic recovery in the UK.
The National Institute of Economic and Social Research (NIESR) reported yesterday that economic activity in the UK expanded at a rate of 0.8% in the three months to November, in line with the majority of analysts’ estimates.
The NIESR commented that “Our estimates suggest that the recent pattern of broad based sectoral growth has continued. These robust rates of growth are consistent with a gradual narrowing of the UK’s negative output gap”.
Meanwhile, the Royal Institution of Chartered Surveyors (RICS) reported yesterday that UK house prices continued to rise in November with demand continuing to outstrip supply across all regions.
In a survey conducted by RICS, survey respondents expect UK house prices to increase by an average of 3% over the coming 12 months and by almost 5% per year for the next five years.
Meanwhile, Bank of England (BoE) Governor Mark Carney repeated last night that the BoE will not rush into raising interest rates in the UK even if the unemployment rate falls quickly.
In a speech to the Economic club in New York, Carney confirmed that he favours using measures other than interest rates to control the UK’s economic recovery saying that monetary policy will need to remain exceptionally loose for some time to come.
Carney said "A recovery may be gaining pace but our economies are a long way from normal. Leverage is still high and weak demand for advanced economy exports could persist for some time".
Finally, the Office for National Statistics (ONS) reported yesterday that UK industrial production grew at a 0.4% month-on-month pace during October, in line with analysts’ expectations.
The data showed that manufacturing expanded at exactly the same pace.
Howard Archer, Chief European + UK economist at IHS Global Insight commented that “With industrial production rising 0.4% month-on-month in October and November manufacturing survey evidence from both the purchasing managers and the CBI strong, there is a very real chance that industrial production in the fourth quarter will significantly outpace the 0.6% quarter-on-quarter expansion seen in the third quarter.”
In the euro zone, the euro came under pressure after data showed that French industrial output deteriorated for the second month running in October.
Overnight, the US dollar has strengthened after Democratic and Republican negotiators on Tuesday night agreed a deal to set spending levels until 2015, at long last breaking the fiscal logjam that has threatened to derail the economic recovery in the US.