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UK economic growth dwarfed again by eurozone in third quarter 

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UK economic growth dwarfed again by eurozone in third quarter 

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(ARTICLE 1)

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The eurozone's economy once again grew faster than the UK's in the third quarter of 2017, according to the latest data, confirming the divergence in economic fortunes between Britain and the continent as Brexit approaches in 2019.

Eurostat estimated on Tuesday that the collective GDP of the 19 states of the single currency area grew by 0.6 per cent in the three months to September, faster than the 0.4 per cent growth registered by the UK over the same period.

This follows eurozone GDP growth of 0.7 per cent in the second quarter, when the UK grew by just 0.3 per cent, also the weakest rate in the G7.

On an annual basis the GDP growth divergence was even more stark, with the eurozone expanding by 2.5 per cent in the third quarter while UK growth was just 1.5 per cent.

The eurozone is experiencing a cyclical recovery, after years of rolling financial crisis, while the UK has been hit this year by a rise in inflation stemming from the slump in sterling in the wake of last year's Brexit vote.

Business investment has also been weak in the UK due to firms' concerns about trade arrangements after March 2019.

Continental drift

France's GDP grew by 0.5 per cent in the third quarter, its national statistics agency reported on Tuesday.

The annual rate of growth in the eurozone's second largest economy was 2.2 per cent, the highest since 2011, driven by consumer spending and business investment.

Meanwhile, eurozone unemployment declined to 8.9 per cent in September, the lowest since January 2009, although still well above the UK's current rate of 4.3 per cent.

Falling joblessness

Eurostat also reported that inflation in the eurozone fell back to just 1.4 per cent in October, still well below the European Central Bank's target of just below 2 per cent.

Core inflation, which strips out volatile fuel and energy costs, was just 0.9 per cent.

UK inflation climbed to 3 per cent in September, a five-year high, and the Bank of England is widely expected in financial markets to put up rates on Thursday for the first time in more than a decade in order to curb further price rises.

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The eurozone economy is still growing faster than the UK

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The eurozone's economy once again grew faster than the UK's in the third quarter of 2017, according to the latest data, confirming the divergence in economic fortunes between Britain and the continent as Brexit approaches in 2019.

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Britain's shoppers rein in spending, first yearly decline since 2013

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Britain's shoppers rein in spending, first yearly decline since 2013

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(ARTICLE 2)

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LONDON (Reuters) - British retail sales recorded their first year-on-year decline since 2013 last month as consumers struggled with fast-rising prices and stagnant wages.

Although the fall was less severe than analysts had expected, the official data showed a 0.3 percent year-on-year fall in sales volumes -- the biggest since March 2013.

That partly reflected a very strong performance by retailers in October 2016 which distorted the comparison.

"We are continuing to see an underlying picture of steady growth in retail sales, although this October suffered in comparison with a very strong October in 2016," ONS statistician Kate Davies said.

Mild weather also put shoppers off buying winter clothes, adding to the weakness in the figures.

But volumes were still far lower that they were before the June 2016 vote to leave the European Union hit sterling and drove up inflation.

Looking at the three months to October, which smoothes out monthly volatility in the data, sales growth picked up to 0.9 percent from 0.7 percent in the three months to September.

This meant sales volumes in the three months to October were just 1.1 percent higher than the year before, the weakest growth rate since May 2013.

Sterling rose slightly after the data and British government bond prices edged down as the sales figures came in less weak than suggested by a series of other surveys of retailers.

"This is in stark contrast to the survey data which were pointing to an absolute bloodbath," Alan Clarke, an economist with Scotiabank, said.

"Things are probably as bad as they are going to get, so I'd be hesitant to extrapolate the downward trend too far," he said. "Next year should be a better year as lower inflation and firmer wages reverse this year's downwards trend."

Economists taking part in a Reuters poll had predicted sales would drop 0.6 percent on the year and grow just 0.1 percent on the month, according to the median forecasts.

The ONS said monthly sales in fact rose by 0.3 percent along with the minus 0.3 percent year-on-year figure.

SLOW DOWN

The Bank of England raised interest rates on Nov. 2, saying it forecast household consumption growth, adjusted for inflation, would slow to 1 percent next year from 1.5 percent.

It also said it expected inflation would peak in October before slowly falling back towards its 2 percent target over the next three years.

Official data earlier this week showed that consumer price inflation held at a five-year high of 3 percent in October while regular pay, adjusted for inflation, suffered its longest run of falls in almost three years.

Recent reports from British retailers have also indicated consumers may be tightening their belts. Department store chain John Lewis [JLP.UL] has posted seven straight weeks of sales decline, clothing retailer Next () missed analysts' quarterly forecasts, and Marks & Spencer () said it faced "stronger headwinds" in food and was slowing openings of its upmarket convenience stores.

The ONS said that retail sales growth in cash terms slowed to an annual 2.8 percent in October, down from 4.6 percent in September and the weakest since June 2016.

The gauge of inflation used in the retail sales data, the retail price deflator, dropped to 3.1 percent in October from 3.3 percent in September.

Reporting by David Milliken and Paul Sandle Editing by William Schomberg/Jeremy Gaunt

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retailers excl food and drug specialists (trbc)

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food distribution and convenience stores (trbc)

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Britain's shoppers rein in spending, first yearly decline since 2013

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LONDON (Reuters) - British retail sales recorded their first year-on-year decline since 2013 last month as consumers struggled with fast-rising prices and stagnant wages. Although the fall was less severe than analysts had expected, the official data showed a 0.3 percent year-on-year fall in sales volumes -- the biggest since March 2013.

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GDP/Inflation
(Data from articles)
Consumers restrain their spending because of rising price and stagnant wages.

When consumers tend to spend less, the demand for the goods and services drop.When there is low demand for the goods and services, the producers will either produce less or there will be unplanned inventory investment accumulation.When there is excessive inventories , producers will not produce more goods and services and cause a decrease in GDP and employment.

Inflation
(Data from articles)
The Bank of England raised interest rates on Nov. 2, saying it forecast household consumption growth, adjusted for inflation, would slow to 1 percent next year from 1.5 percent.

Impact of raising interest rate causes a rise in borrowing cost and repayment of mortgage.The rise in interest rate will only affect the borrower with adjustable-rate mortgage (ARM) which means that the interest rate fluctuates with market interest rates. The rise in borrowing cost might cause cost-push inflation as rise in borrowing cost brings to a rise in the cost of production.

Keynesian
Rise in interest rate that will increase the cost of borrowing will also shift down the consumption line of big ticket item.Higher interest rate may cause consumers save more money instead of spending as they can receive more interest income in the future.When consumers spend less, the aggregate expenditure also decreases respectively.

(Data)
The Bank of England raised interest rates on Nov. 2, saying it forecast household consumption growth, adjusted for inflation, would slow to 1 percent next year from 1.5 percent.

Keynesian Model
Without the adjustment for inflation, household consumption is determined by the level of real disposable income.The growth of household consumption becomes slower may be caused by the decrease in real disposable income of consumers.

When household consumption increases at a slower rate , aggregate expenditure also increases at a slower rate.

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GDP:
The difference of the GDP between the eurozone and United Kingdom (UK) let us compare between the rate of economic growth. It shows us through statistics of how the upcoming Brexit has affected both parties.

As mentioned in the article, the eurozone is experiencing a cyclical recovery. After further reading, it is a "U" shape recovery form the financial crisis where the economy declines and recovers gradually.

Unemployment:
As mentioned in the article, the eurozone is recovering from cyclical unemployment. In the graph provided, the eurozone unemployment rate declined to an all time low since January 2009 of 8.9%. However, UK is doing no far better at an alarming rate of 4.3%.

Inflation:
All these GDP and unemployment rates are affecting the inflation rate rise and fall. But onto the bigger picture, especially due to Brexit. As the unemployment rate links to GDP which affects the GDP per capita all these effect how much a citizen of UK's spending power has. This would then further aggravate the inflation rate as people try to balance their individual accounts. As seen in the article, the UK inflation has climbed to a five year high of 3%.

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Inflation: British consumers are struggling with fast-rising prices and stagnant wages. The official data showed a 0.3% year-on-year fall in sales volumes -- the biggest since March 2013. Mild weather also put shoppers off buying winter clothes,  adding weakness to the figure. The bank of England has raised interest rates, saying it forecast to household consumption growth, adjusted for inflation, would slow down 1% next year to 1.5%. Expected inflation would peak in October before slowly falling back to its target of 2% in the next 3 years. Consumer price inflation was held at a five-year high of 3% in October while regular pay, adjusted for inflation, suffered its longest run of falls in almost 3 years. The ONS said that retails growth in cash terms slowed to an annual 2.8% in October, from 4.6% in September. Furthermore, the retail price deflator 3.1% in October from 3.3% in September.

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UK Businesses are flourishing despite Brexit uncertainty

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UK Businesses are flourishing despite Brexit uncertainty

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(ARTICLE 3)

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Separate data from EY suggested growing confidence among UK-based businesses, as many prepare to hit the acquisition trail. 60pc of UK companies plan to make acquisitions over the next 12 months, the consultancy's Global Capital Confidence Barometer found.

This is the highest level since 2009, and four percentage points above the global average. EY found that most UK businesses are focusing on deals up to $250m in size, with 57pc of respondents seeking acquisitions of this scale, and 20pc were looking at deals worth up to $500m.

The barometer also revealed that, while Brexit is a driver of deals as companies reorganise their portfolios, it was also cited as a risk to them.

Despite the uncertainty Brexit is causing, the UK still remains one of the most popular targets for acquisitions, behind the US and then China, and ahead of Germany and Australia in fourth and fifth spots respectively.

Steve Ivermee, managing partner at EY, said: "UK companies are facing an unprecedented breadth of challenge and change. Given these risks, the confidence shown by UK companies implies a strong belief in their ability to respond."

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UK businesses are flourishing despite Brexit uncertainty

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Separate data from EY suggested growing confidence among UK-based businesses, as many prepare to hit the acquisition trail. 60pc of UK companies plan to make acquisitions over the next 12 months, the consultancy's Global Capital Confidence Barometer found. This is the highest level since 2009, and four percentage points above the global average.

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GDP: UK's GDP growth was once again slower than that of the Eurozone countries with the UK"s growth coming in at 0.4% while the EU countries at 0.6% in the third quarter of the year. The contrast is even more obvious when the annual growth is compared with the Eurozone growing at 2.5% while UK growing only at 1.5%.

Unemployment:

Inflation:

Keynesian Model:

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(Data from paragraph)
Businesses are controlling costs and there is finally some improvement, though small, in export sales growth. IT, construction and business services are all modestly positive

Inflation
When cost of production decreases, the impact of cost-push inflation might not be so severe.
When the firms manage to control the cost, the profit gained will be more than before.

(Data)
The recent interest rate rise was not unexpected but any sudden shocks from the Chancellor at the Autumn Budget could have a serious impact.

Keynesian Model
Rise in interest rate might have impact on the level of investment as interest rate is the financing cost of any investment proposal.
There will be a upward movement along the firms' investment demand curve.When interest rate increases, the real investment by the firms decreases.When the Gross Private Domestic investment decreases , the aggregate expenditure drop respectively which means that growth in GDP might be slower.

Challenges facing businesses at the moment include regulation, with the ICAEW noting the apprenticeship levy, gender pay reporting rules and incoming data protection red tape are all weighing on firms.

All these factors will cause a shift in the firms' demand curve.

Business Taxes:
Apprenticeship levy is a UK business levy which is used to fund apprenticeship training. In the current (2017/18) tax year it is paid by employers with an annual pay bill of more than £3 million.
Business taxes affects firms' after tax profit and firms might be hiring less new workers as employers need to pay taxes for apprenticeship training.

Unemployment
This might cause an increase in unemployment rate since there are lesser job opportunities in the market.

Technological Changes:
Incoming data protection also requires firms to fork out a big amount of money to set up the system required for the data protection.

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GDP:
(Statistical Data)
GDP growth rate of UK is 0.3% whereas eurozone GDP growth rate is 0.7% in third quarter of 2017.
On an annual basis the GDP growth divergence was even more stark, with the eurozone expanding by 2.5 per cent in the third quarter while UK growth was just 1.5 per cent.

The economy of UK is still growing but at a slower rate compared to Eurozone. That means the total market value of all final goods and services produced in the UK economy had fallen.

The eurozone is experiencing a cyclical recovery, after years of rolling financial crisis.
-Real GDP of Eurozone increases and unemployment rate falls.Business profits increases and production capacity is more utilized compared to GDP of UK.

Inflation/GDP/Keynesian Model
(Data from article)
UK inflation climbed to 3 per cent in September, a five-year high.

Inflation had caused the economy of UK grow slower as inflation is hitting consumer spending.Inflation had eroded the purchasing power of consumer.Consumer spending is a big part of aggregate expenditure.
Aggregate expenditure is also equal to GDP.
Inflation in UK is cost-push inflation.Higher price of crude oil had pushed up the cost of production.Food prices is also rising which cause the living cost of residents rise respectively.The increase in the cost of production drives cost-push inflation.Although there is increase in prices of goods and services, but there isn't any increase in wages.The real income of workers in UK had dropped.Prices continue rising but  nominal income received by workers remain the same.That means workers which are also consumers in the economy tend to spend less because their purchasing power had been eroded.The employers want to cut off the cost of paying wages to the employees because the cost is also a cost of production.They are unable to give a big rise.

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Unemployment: More specifically, there is scenario of underemployment. A shortage of skilled workers is evident. Around a quarter of firms said they need more skilled staff, though only 16% said a shortage of managers is a problem.