U.k. net borrowing rises in October, borrowing trajectory unlikely to tilt down in coming years
Source: FxWire Pro - Commentary / 21 Nov 2017 13:44:27 Eastern Standard Time
The ONS figures released today continued to imply that the U.K.’s public finances are in a comparatively good position as compared with what was anticipated at the beginning of the fiscal year. Net borrowing was up GBP 8 billion in October, a bit steeper than in October 2016. Meanwhile, cumulative borrowing has come in at just GBP 38.5 billion so far in 2017, rising just GBP 16.4 billion.
“But while the situation appears to be better than the OBR and the government itself hoped, the projections in tomorrow's Budget are unlikely to show that the borrowing trajectory over the coming years is tilting further down, given that there are plenty of factors working in the other direction”, noted Daiwa Capital Markets.
Moreover, a higher expected path of Bank Rate signifies that anticipated debt interest payments would be higher too. But analysis from the Institute for Fiscal Studies implies that the impact of the above would be overshadowed by a downgrade to the OBR’s growth projections. The U.K GDP growth is unlikely to reach 2 percent in 2017 as the OBR expected six months ago. However, OBR has signaled that it would revise down its projection for productivity growth.
Meanwhile, the CBI Industrial Trends survey had signaled a noticeable deterioration in manufacturing sector momentum after a slow beginning to the fourth quarter. However, the figures for November were much more positive. The output volume index rose to 28 percent, a level close to the top of the recent range. Even if the output growth is not expected to be sustained in the coming quarter, the indicator for the size of the order books rebounded and rose to a 29-year high, while the equivalent measure for export orders was at the joint-highest level in over 20 years.
At 18:00 GMT the FxWirePro's Hourly Strength Index of British Pound was highly bullish at 147.061, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -39.5747. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
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