Today, U.K. will release important data concerning housing, industrial and manufacturing sectors in the economy. The British economy had shown improvement in the previous period, more specifically since the second quarter of the current year, where the pace of contraction eased to 0.6% compared with 2.4% in the first quarter.
Later on today, U.K. will release its Halifax House Prices for the 3 months in September, with expectations reaching to 0.6% from 0.8%; while on the year, the reading is predicted to incline to -7.8% from -10.1%.
House Prices inclined for the second consecutive month in August to 0.8%, after surging 1.2% a month earlier, buoyed by the lower benchmark interest rate which encouraged buyers to step in. The reports released recently are adding further clues that the slump in the housing market, which had triggered the financial crisis, has eased thanks to the ongoing efforts by the BoE to revive the economy and boost prices.
The BoE cut the borrowing cost by 4.5% since October, attempting to rekindle growth within the economy which had suffered tremendously from the global downturn. Besides, it adopted unprecedented methods of quantitative easing to accelerate the recovery pace, through supporting markets with adequate liquidity to spur lending and thereby spending. Gordon Brown gave permission to the BoE to spend up to 150 billion pounds on buying bonds. Nevertheless, the BoE chose to use only 75 billion pounds, before raising them to 125 billion pounds then to 175 billion pounds.
In addition, industrial and manufacturing production reports are going to be released today. Industrial production is expected to retreat to 0.2% in August from 0.5% in July; whereas on the year, the reading is estimated to show an incline to -8.3% from -9.3%. On the other hand, manufacturing production for August is projected to contract to 0.3% from 0.9% a month earlier, while annually, the reading is to soar to -9.3% from -10.1%.
Manufacturing production climbed to its highest level in 18 months in July, where the rate jumped 0.9% from 0.6%; having an impetus from higher production of autos and pharmaceuticals. The car stimulus introduced by Gordon Brown for traders to buy new cars for old ones boosted car sales. The higher level of production may provide evidence that the contraction will stall in the third quarter.
It is reasonable to say that the economy is showing strength and signs of recovery. However, the high unemployment rate is putting downside pressure on personal income and curbing spending for households. The jobless rate remains the main threat for recovery, since there still are job sheds by firms that are trying to reduce their costs to make profits again. The unemployment rate signaled the highest in 14 years, where The number of job seekers in the three months ending July augmented by 210,000 to 2.47 million.
The IMF in September's forecasts estimated that the U.K. economy will contract 4.4% in the current year and growing 0.9% next year. It also advised central banks to keep their interest rate low and continue buying bonds as the recovery is expected to be sluggish.
