The official third estimate of Q3-2016 GDP growth from the Office for National Statistics (ONS) indicates that the UK economy grew by 0.6% in the third quarter which was a faster growth rate than for previous estimates for 2016. Growth for the July-to-September period had originally been estimated at 0.5%. The latest data suggested that the business and financial sectors were more active than previously estimated. The ONS also said that growth in the third quarter of the year was helped by robust consumer demand. However, the ONS trimmed its estimates of growth in the first and second quarter of the year. It now estimates that the economy grew by 0.3% in the first quarter, compared with an earlier figure of 0.4%, and has cut its estimate for second-quarter growth to 0.6% from 0.7%. Analysts predict that the UK GDP growth rate in the final quarter of the year is likely to be positive at 0.5% (2.0% annualised).
Retail sales fell in December at the fastest rate in nearly five years according to ONS official figures. Higher prices and Black Friday deals in November appear to have caused consumers to buy less of everything from household goods to food and clothing. Volumes dropped by 1.9% from November which was the biggest monthly drop since April 2012 and greater than the 0.1% decline expected by economists. Compared with a year ago, sales were up by 4.3% but below forecast growth of 7.2%.
Economists warn that steeper inflation is likely to be the theme for the rest of the year as higher prices reduce disposable income and hurt consumer spending power. The annual rate of consumer price inflation (CPI) rose to 1.6% in December which was the highest level reported since July 2014 and up from 1.2% in November. The consensus view of analysts was for an annual inflation increase of 1.4%. The ONS said that higher prices were likely to have had an impact on spending, as shop prices rose at the fastest rate in three years in December, increasing on an annual basis by 0.9%. Excluding petrol and diesel, prices increased by 0.1% which was the first gain since 2014.
Official figures from the ONS indicated that UK unemployment fell by 52,000 to 1.6 million in the three months to November – the lowest level for more than a decade – while the jobless rate was steady at an 11-year low of 4.8%. The employment rate was steady at a record 74.5% although wage growth picked up pace. Average weekly earnings (excluding bonuses) increased by 2.7% compared with a year earlier. Growth in pay including bonuses rose 0.2 percentage points to 2.8% for the year to November. However, the number of people in work slipped by 9,000 to just over 31.8 million.
Official data indicates that the Chinese economy grew by 6.7% in 2016, which compares with 6.9% for the previous year, its slowest annual growth since 1990. However the figure was in line with the country’s official growth target of between 6.5% and 7.0%. China is a key driver of the global economy and any growth slowdown is a major concern for investors around the world. Some analysts are encouraged by data that indicates an annual growth rate of 6.8% in the last three months of 2016 – a slightly faster pace than the rest of the year. However some observers caution that the country’s growth was actually much weaker than the official data would suggest.
Two of Europe’s biggest banks – HSBC and UBS – have announced that they are likely to each move about 1,000 jobs out of London as they prepare for the expected disruption caused by the UK’s exit from the European Union (EU). There are also strong rumours that Goldman Sachs is considering halving its London workforce to 3,000 and moving key operations to New York and continental Europe, particularly Frankfurt, where it too could move up to 1,000 staff. Other banks are expected to announce more concrete plans for how they will adapt to Brexit in the coming months after Prime Minister Theresa May confirmed in a speech last week that the UK would leave the European single market.
Barclays has decided to contest the claim by the U.S. Department of Justice (DoJ) over its role in the selling of toxic mortgage securities in the run-up to the 2008 financial crisis. A lawsuit filed last month by the DoJ accuses the bank of misrepresenting the quality of $31bn (£25bn) of home loans between 2005 and 2007. Lawyers acting for the bank will submit a motion to dismiss the lawsuit in New York in the next 90 days. Barclays is the only bank that so far has contesting the allegation that it deceived investors. U.S. regulators have collected over $60bn in fines from lenders including Bank of America, Goldman Sachs and Citigroup. Last month Deutsche Bank agreed to pay $7.2bn after protracted negotiations with authorities while many analysts expect the Royal Bank of Scotland plc to be the subject of a similar settlement claim in the near future.
|5-YEAR CDS SPREADS AND SHARE PRICES|
|Movements over the Last Week|
|Date:||23rd January 2017|
|5-Year CDS Spreads (bps)||Equity Share Prices|
|ABN Amro Bank N.V.|
|ABN AMRO Groep N.V.||61||74||-17.6%||22.38||22.55||-0.8%|
|Parent: Aldermore Group plc|
|Aldermore Bank plc||n/a||n/a||n/a||2.19||2.18||+0.5%|
|Allied Irish Banks||64||63||+1.6%||4.92||5.20||-5.4%|
|Parent: Arbuthnot Banking Group plc|
|Arbuthnot Latham & Co.||n/a||n/a||n/a||14.83||14.50||+2.3%|
|Aust and NZ Banking Group Ltd||65||67||-3.0%||29.40||30.67||-4.1%|
|Banco Bilbao Vizcaya Argentaria S.A.||122||127||-3.9%||6.12||6.24||-1.9%|
|Parent: Barclays plc|
|Barclays Bank plc||82||80||+2.5%||2.27||2.35||-3.4%|
|BNP Paribas S.A.||83||87||-4.6%||60.06||62.16||-3.4%|
|Parent: Close Brothers Group plc|
|Close Brothers Limited||n/a||n/a||n/a||14.46||14.50||-0.3%|
|Credit Agricole S.A.||72||77||-6.5%||12.39||12.59||-1.6%|
|Parent: Credit Suisse Group AG|
|Credit Suisse AG||116||119||-2.5%||15.55||16.12||-3.5%|
|Deutsche Bank AG||156||165||-5.5%||18.06||18.15||-0.5%|
|Parent: HSBC Holdings plc|
|HSBC Bank plc||69||71||-2.8%||6.78||6.78||0.0%|
|Parent: ING Groep N.V.|
|ING Bank N.V.||62||67||-7.5%||13.36||13.78||-3.0%|
|Intesa Sanpaolo S.p.A.||127||134||-5.2%||2.47||2.47||0.0%|
|Parent: Investec plc|
|Investec Bank plc||n/a||n/a||n/a||5.66||5.67||-0.2%|
|Parent: Lloyds Banking Group plc|
|Lloyds Bank plc||70||72||-2.8%||0.65||0.66||-1.5%|
|Metro Bank plc||n/a||n/a||n/a||31.70||31.27||+1.4%|
|Nationwide Building Society||80||80||0.0%||n/a||n/a||n/a|
|Nordea Bank AB||65||65||0.0%||104||101||+3.0%|
|Parent: RBS Group plc|
|Royal Bank of Scotland plc||113||118||-4.2%||2.21||2.21||0.0%|
|Ult. Parent: Banco Santander S.A.|
|Santander UK plc||81||81||0.0%||5.13||5.15||-0.4%|
|Shawbrook Group plc||n/a||n/a||n/a||2.42||2.55||-5.1%|
|Parent: Standard Chartered plc|
|Standard Chartered Bank||107||117||-8.5%||7.53||7.19||+4.7%|
|Svenska Handelsbanken AB||55||56||-1.8%||129||126||+2.4%|
|FTSE 350 BANK INDEX||n/a||n/a||n/a||4292||4309||-0.4%|
|SNR FIN ITRAX CDS 5-YEARS (ESTIMATED)||86||90||-4.2%||n/a||n/a||n/a|