UK Economy? All good.

UK GDP

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What's going on?

The British economy seems to have maintained its stiff upper lip in the immediate aftermath of the Brexit vote. According to the first official estimate, its economy grew more than expected in the past three months (the third quarter).

What does this mean?

Prior to the Brexit vote, many economists suggested that the shock of a vote to leave the European Union would lead to a big decline in economic growth. However, according to Thursdays data, the UK economy grew 0.5% in the third quarter. Thats weaker than the 0.7% it grew in the second quarter, but still healthy compared to other developed economies (the UK appears to be growing a little faster than both the US and Europe).

Why should I care?

The bigger picture: The economic environment is about to get much more challenging.
The good news is that the shock of the Brexit vote didnt cause economic growth to freeze. But the weak pound is about to make many consumer products more expensive and no, wages wont go up immediately to compensate for it. At the same time, the political uncertainty appears to be holding businesses back from making investments, like buying new equipment or hiring as many people as they otherwise would. The warnings of economic strife have yet to come true, but substantial risks remain for 2017.


For markets: The Bank of England (BoE) is now less likely to decrease interest rates in November.
In August, Britains central bank took some aggressive action to lower borrowing costs for people and businesses in the hopes that it would spur some additional spending. With the economy looking like its, so far, weathering the Brexit storm, the BoE is more likely to wait until at least next year before taking any more measures to boost the economy (like lowering interest rates further). Thats a moderate negative for UK bonds and, to a lesser degree, stocks in the interim (click here to see how interest rates can affect the prices of stocks and bonds).

Originally posted as part of the Finimize daily email.

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