The release of UK GDP data this morning showed a slowdown in the growth rate of economic activity for the first quarter, with an expansion of 0.4% versus 0.6% previously. The most worrisome component was the sharp drop in manufacturing to -0.4% which comes after the sector recorded an expansion of 0.1% for Q4 2015. The reaction in the markets has been fairly subdued with the decline coming in line with expectations and an upward revision to last month’s print softening the blow somewhat. The FTSE 100 was already trading in the red prior to the release and whilst the pound sold-off before the announcement it has actually pared back some of these losses since.
UK economy losing momentum
The declining pace of expansion in the UK economy has been driven by the weakest growth in almost a year for services and comes at a bad time for the government, with less than two months to go before Britons vote on whether they will remain in the European Union. Having said that the miss was as expected and recent leading indicators have forewarned of today’s loss in momentum for the economy with employment data and retail sales both disappointing last week.
Barclays higher despite profit drop
Shares in British bank Barclays have risen by more than 2% this morning despite first quarter earnings coming in below analysts’ estimates and showing a 25% decline on the same period last year. The move higher in the stock can possibly be attributed to comments from CEO Jes Staley who said the bank was making “good early progress” in pushing through the cost-cutting and restructuring strategy announced on the 1st March. The drop in the bottom line performance mirrors the six biggest banks across the pond who have already reported lower profitability compared to the same period last year, as the banking sector as a whole seems to be facing a more challenging trading environment at present relative to the start of 2015
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