Traders Cautious as UK Economy Misses Growth Target

LONDON, August 8, 2011 -

The UK economy recently missed its growth targets in the second quarter of 2011, posting a meagre increase of just 0.2 percent of GDP compared to the projected rise of 0.7 percent.

Sean Power, Equity Analyst at financial trading provider City Index (www.cityindex.co.uk/), considered potential reasons behind the lowest UK growth seen since Q1 2010, stating: “The ONS said that the reading would have been much stronger at 0.7% were it not for ’special factors’ such as the additional bank holiday for the royal wedding, the warm weather and the Japanese tsunami fallout.”

Though Chancellor George Osborne hailed the figures as evidence the UK economy is recovering, Mr. Power remained sceptical. “Whilst it may be reassuring to hear that special one-off effects may have taken 0.5% off growth on the quarter, there remains a clear question mark over the strength of the UK economic recovery. There was an initial bounce in the pound sterling on the back of this data as the market had feared that there could have been a contraction in growth. The pound strengthened against the dollar, rallying past the $1.64 level for the first time in five weeks.”

In truth there can be no certainty as to the impact of the special events highlighted by the ONS. As always, traders should speculate with care, employing risk management techniques and undertaking meticulous research ahead of each trade.

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Contact: Joshua Raymond, City Index Group, Tel: +44(0)20-7107-7002, Email: joshua.raymond[at]cityindex.co.uk