Adding further bullish sentiment, the Office for National Statistics (ONS) announced in late February that the UK economy grew by 0.2% in 2012. This is a modest improvement from their previous estimate of zero growth. However, they left their Q4 (2012) assessment at -0.3%, which is unchanged from their previous estimate.
The revised annual figures reflect an improvement of 0.1% in the contraction of Q1 and an improvement from 0.9% growth in Q3 to 1.0%, with the benefits seen from the London Olympics being the main factor here, as all ticket sales were statistically deemed to have taken place in Q3. Whilst the final Q4 figures disappointingly remained at -0.3%, there were some interesting differences in the performance of various business sectors. The construction sector had their output revised upwards to 0.9% from the previous estimate of 0.3%, whilst the production sector had their performance adjusted down from a contraction of 1.8% to 1.9% and the service sector, which is responsible for 75% of the UK economy, saw their performance revised down to a contraction of 0.1%. At the same time the ONS announced expenditure figures for Q4 2012, with consumer spending up 0.2%, but imports down 1.2% and exports down 1.5%. Business investment was also reported to have fallen by 0.4%. Commenting on this report, the Director General of the British Chambers of Commerce, John Longworth, said: “These figures, coupled with the recent downgrade of the UK’s credit rating, confirm that action must be taken quickly to get the economy growing again. “The Chancellor should seize the opportunity in next month’s Budget to be radical, and introduce measures that create an environment of enterprise, stimulate export growth, kick-start infrastructure projects and create a structure of business finance which supports growing companies.” As alluded to by Mr Longworth, Moody’s, the rating agency, downgraded the UK from its long-standing AAA rating one notch to AA1, stating that growth in the UK would “remain sluggish over the next few years.”

Markets (February) (Data supplied by the Outsourced Marketing Department) The equity markets had a relatively quiet month with the FTSE100 shrugging off the downgrade of the UK credit rating by Moody’s, ending the month on 6,325.9, up a marginal 0.6%. This index is now only 3.6% below its long-term trend. The wider FTSE250 fared slightly worse, closing February at 13,704, down 1.03% from its January close. Across the pond the Dow Jones continued in bullish mood finishing on 14,054.49, up 1.4%, and the Nasdaq on 3,160.19, little changed on the month. On the negative side, the inconclusive Italian general election results renewed concerns over eurozone political and economic stability. This was reflected in the Eurostoxx50 index falling nearly 5% on the month to close at 2,616.65. Meanwhile, in Japan, following the election of new Prime Minister Shinzo Abe, the Nikkei has enjoyed its longest sequence of weekly gains since 1959, rising by 18.7% to 11,559.36 since he was elected in December last year. At the same time the Yen currency has devalued by 20%. These two factors combined will greatly enhance Japan’s market competitiveness. The currency markets also saw some volatility. Partly as a result of the UK losing its AAA rating from Moody’s, sterling fell to $1.51, its lowest since August 2012 against the US dollar, and to €1.16 against the Euro, down 0.6% on the month. At this level sterling has fallen by 7.9% against the greenback and 6% against the Euro since the start of 2013. The US dollar dipped against the Euro finishing the month at $1.30. On the commodity front, Oil mercifully dipped a little, with the Brent Crude benchmark closing February on $111.87, down 3.18% on the previous month, and gold also dipping to $1,581.30 a troy ounce, which is a 5% fall in the month.

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