Sterling slides as recovery slows

The pound has fallen further against the dollar as Britain's recovery slows down.

The latest UK economic data showed the rebound losing some steam. The monthly PMI survey of the services sector, which comprises 80% of Britain's GDP, showed activity slowing to its lowest level in 19 months in December.

This followed similar disappointments in surveys of the manufacturing and construction sectors; momentum in the latter is down for a third successive month to a 17-month low. Car sales enjoyed their best year in a decade in 2014, however.

Mortgage approvals have continued to dip, but demand for credit card debt has surged in the past three months the biggest uptick since before the credit crunch. Sterling has fallen to its lowest level against the US dollar since mid-2013.

What the commentators said

Dig a bit deeper into the services survey, and there is better news. Employment has expanded for two years on the trot now, and wages are finally starting to rise, which bodes well for consumption.

It's a pity consumers seem to be returning to bad old habits though, said Alistair Osborne in The Times. Maybe "maxing out on plastic" really is a sign of economic confidence. But then, that's what people were saying in 2007. "Loadsa living the lifestyle back then."

Meanwhile, the global picture, especially the eurozone, is looking increasingly uncertain, added The Independent's James Moore. The occupant of 11 Downing Street may be starting to feel twitchy. "This is no way to be starting an election year." The election is also unusually unpredictable, which won't exactly help overall confidence.

The slowdown in growth and low inflation points to interest rate rises later rather than sooner. The election, which could well be inconclusive, is also likely to rattle foreign investors, added Morgan Stanley who have also noticed that the UK has a huge current-account deficit. Expect sterling to stay "under sustained pressure" over the next few months.

Recommended

House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
1 April 1999: The minimum wage is introduced in Britain
This day in history

1 April 1999: The minimum wage is introduced in Britain

On this day in 1999, the national minimum wage was introduced in Britain, bringing an instant pay rise to 1.9 million low-paid workers.
1 Apr 2021
How the vaccine wars will harm us all
Global Economy

How the vaccine wars will harm us all

Grabbing and hoarding vaccine supplies, or even manufacturing one’s own, might seem to make sense for a state in an emergency. But the damage done to …
27 Mar 2021
House price rise slows – but not by much
House prices

House price rise slows – but not by much

The rate of increase in UK house prices slowed in the year to January. But nothing seems able to halt their determined march higher, says Nicole Garci…
26 Mar 2021

Most Popular

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021
House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021