Economic Indicators - UK
In many ways the UK economy maintains strong independence from other global economies and is often at a different stage in the cycle compared to the US. Data from the UK is not very relevant outside its borders and tends only to effect movements in sterling and UK equities. Data is closely watched for indications of interest rate changes forthcoming from the Bank of England Monetary Policy Committee.
- Bank of England Policy meeting minutes
- CPI
- GDP
- Nationwide consumer confidence
- Retail sales
- RICS House Price Index
- Trade balance
Name: Bank of England MPC minutes www.bankofengland.co.uk
Briefly: Unlike its European and US counterparts, the Bank of England provides little immediate commentary after its interest rate decision. Investors have to wait two weeks until the minutes of the meeting are released to see how the votes were split and find out what he Monetary Policy Committee thinks about economic developments both in and outside the UK. Although the data is two weeks old, it is still the best indication the market can get about future interest rate decisions.
Source: Bank of England
Frequency: Monthly
Released: Two weeks after the last interest rate decision
Market impact: High. The vote split is closely watched as analysts and commentators make predictions about how members of the committee have voted. Diversions from this can move markets. Text of the minutes is also closely watched for changes in sentiment.
Name: Consumer Price Index (CPI) www.statistics.gov.uk
Briefly: The CPI is the most commonly used method of measuring price inflation - that is the change in the cost of living. Although the RPI (Retail Price Index) is also well known, the Bank of England uses the CPI as its main benchmark. Inflation means that the purchasing power of the sterling is falling. In a stable economy, this is offset by individuals receiving interest payments on their savings. Thus the relationship between inflation and interest rates is an important one. CPI tracks the changes in the prices of a basket of goods that represents the typical British household expenses such as food, energy, housing, clothing, transportation, medical care, entertainment and education. The CPI ex-food and energy (or Core CPI) is also released at the same time and this often provides a cleaner indication of inflation since it removes some categories which may be affected by external shocks such as high oil prices.
Source: Office for National Statistics
Frequency: Monthly
Released: Mid-month
Market impact: High. One of the mandates of the Bank of England (and any central bank) is to keep inflation under control. One of the ways to do this is by raising interest rates. Thus if inflation or CPI is on the rise, higher interest rates may be on the cards.
Name: UK GDP www.statistics.gov.uk
Briefly: Measures the overall growth of the economy, reported in % terms.
Source: Office for National Statistics
Frequency: Quarterly
Released: 3 weeks after the end of the quarter
Market impact: Moderate. Much of the data has already been released by the time GDP actually comes out and so estimates are usually quite accurate. However, unexpected changes do occur regularly and can have an impact on both currency and equity markets. Higher than expected figures can signal a stronger economy and thus may indicate a need for higher interest rates, thus inducing strength in sterling and may send equity markets downward in the short term. However growth is usually a good sign for an economy and will, in the longer term, have a positive effect on equity markets.
Name: Nationwide Consumer Confidence www.nationwide.co.uk/consumer_confidence/default.htm
Briefly: Survey of 1000 consumers in the UK, run in association with TNS UK since May 2004. The Nationwide Consumer Confidence Index is calculated based on the results of the survey. This provides an indication of the view of the population on the economic situation in the UK.
Source: Nationwide Building Society
Frequency: Monthly
Released: Just after 11pm on the Wednesday before Bank of England interest rate decisions
Market impact: Moderate, but will likely grow in importance as time goes on.
Name: UK Retail Sales www.statistics.gov.uk
Briefly: The change in volume of sales by retailers in the UK. This is a seasonally adjusted figure, based on a survey of retailers in the UK
Source: Office for National Statistics
Frequency: Quarterly
Released: Quarterly
Market impact: High. Retail sales are a key measure of the health of the consumer. A healthy consumer generally means a healthy economy and strong output. Poor retail sales may mean consumers are struggling as they have reduced disposable income, or are concerned about the future and are saving money for bad times ahead.
Name: RICS House Price Index www.rics.org
Briefly: Compiled by the Royal Institution of Chartered Surveyors, this index provides a gauge of the cost of homes in the UK. The survey is very much front line since it comes from surveyors. It is calculated as the % of surveyors reporting a rise in price versus those reporting a fall.
Source: Royal Institution of Chartered Surveyors
Frequency: Monthly
Released: Mid-month
Market impact: Moderate. Provides a good snapshot of the strength of the housing market.
Name: UK Trade Balance www.statistics.gov.uk
Briefly: The difference between exports of goods and services out of the UK and imports into the UK. It is one of the biggest components of the Balance of Payments. A positive number or surplus indicates that exports are greater than imports. The opposite implies a deficit.
Source: Office for National Statistics
Frequency: Monthly
Released: Mid-month
Market impact: High. If a country is running a trade deficit, they are essentially losing domestic currency out of the country, as locals are importing more goods and thus need to sell sterling to buy foreign currency. Deficits can put large pressure on the domestic currency.