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The pound remains fighting fit against other currencies given that - next to Europe and the US - Britain appears quite stable. This, however, is not to suggest that British economic data is that encouraging.
Last week, for instance, July results in retail sales increased beneath forecasts, indicating just 0.2 per cent growth compared to expectations of 0.4 per cent. This tells us that consumers continue to feel inhibited on the high street, preferring to save than spend.
In addition, unemployment jumped last month too, growing +0.2 per cent compared to June to reach 7.9 per cent. This is perhaps minor compared to unemployment in Spain – breaching 20.0 per cent at present – but nonetheless indicates that conditions in British labour are tough.
Elsewhere in British economic data, last week the Bank of England minutes revealed that the MPC opted 9-0 against raising interest rates this month, telling us that all nine members of the BoE committee prefer to hold rates at 0.50 per cent. This is to protect fragile growth in Britain: though inflation is expected to breach 5.0 per cent in coming months, higher interest rates could damage economic expansion in Britain and this must be kept safe.
Last but not least in Britain, the latest public sector net borrowing data suggests that the Chancellor’s deficit reduction plans are proceeding on course. Last month public borrowing entered surplus -£1.961bn (minus figures in borrowing are positive) compared to expectations of +£0.2bn borrowing, meaning that spending in the public sector arrived more than £2bn forecasts.
In total public sector spending in the first four months in 2011 arrived £4bn less than 2010 at £40bn, while the independent Office for Budget Responsibility believes government spending plans are on course. This is perhaps the one bright spot in the present outlook.
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