More Mixed Signals From The UK Economy

By: Mike Campbell
Let’s start with the good news; the FTSE in London closed at its highest level for more than a year. At yesterday’s close, the FTSE stood at 5210.17, a level not seen since September 2008. The bullishness has been put down to higher commodity prices and an optimistic outlook over the forthcoming US corporate earnings declarations. That sentiment may continue into next week and some analysts believe the rally will continue above the 5300 mark.

But every silver lining has a cloud. The British Chambers of Commerce (BCC) believes that whilst business confidence was improving, the state of the economy was still frail. The BCC polled 5000 UK businesses and determined that confidence was at its highest level since early 2008. They found that despite progress in the manufacturing and service sectors, UK orders and sales were down on the previous quarter. They are sceptical that the UK economy will have emerged from recession when Q3 figures become available next week, although they believe it is “on the brink” of doing so. The British Retail Consortium reported that retail figures were up 2.8% for September (year-on-year), but they cautioned that the rise was on the back of “weak performance” last year.

Sterling closed lower against both the Euro and the Dollar, but gained slightly against a weakening Yen.

Russian President, Dmitry Medvedev announced that the Russian economy would shrink by 7.5% this year. The country is expected to emerge from recession in Q3. Russia’s economy is highly reliant on oil exports and has suffered due to the declining price and demand for the commodity as the world struggles with a major recession. At the beginning of the year, one Euro would buy 40.78 Roubles; at yesterday’s close this had risen to 43.59.

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