UK Growth Revised to 0.6%; Current Account Deficit Widens

Arthi Gupta
22 Dec, 2011
New York City

The UK indexes traded higher after gross domestic product expanded 0.6% and the volatile current account deficit widened in the third quarter. Ireland''s retail sales increased in November.

[R]3:15 PM London – The UK indexes traded higher after gross domestic product expanded 0.6% and the volatile current account deficit widened in the third quarter. Ireland''s retail sales increased in November.[/R]

The UK indexes advanced led by miners and banks. Gross domestic product grew more than estimated in the third quarter on strong services and construction output.

In London, FTSE 100 Index gained 58.85 or 1.1% to 5,449.92 and the pound edged higher to $1.5672.

UK Economy Expands

The UK gross domestic product expanded 0.6% in the third quarter from a quarter ago, revised up from the initial estimate of 0.5%, data from the Office for National Statistics showed today. The increase in the growth was on higher than earlier expected increase in inventories.

From a year ago the economic growth was left unchanged at 0.5% increase.

The strength in the economy surprised economists as government spending accounted for the smaller portion of the economy and private investment increased. The quarterly increase was the largest growth since the third quarter of 2010.

Gross fixed capital formation in the quarter increased 1.3% after falling 0.6% in the previous quarter.

Output of the service industries grew 0.7% in the third quarter, revised up from 0.6%. The latest data showed 0.3% rise in construction output in the third quarter compared to the previous estimate of a 0.2% fall.

UK Current Account Deficit Widens

The UK current account deficit widened to the highest on record in the third quarter, the Office for National Statistics said today.

The current account gap rose to £15.2 billion from a revised £7.4 billion in the prior quarter. The third quarter deficit was equivalent to 4% of GDP.

The trade deficit increased by £2.7 billion to £9.9 billion and the deficit on current transfers rose by £0.9 billion to £5.7 billion.

Irish Retail Sales Improves

Ireland''s retail sales increased a seasonally adjusted 1.6% from a month ago in November, after rising 0.4% in October, data released by the Central Statistics Office showed.

Retail sales of food, beverages and tobacco rose 1.7%, while clothing and footwear sales climbed 7.2% from a month ago in November.

Annually, retail sales decreased 0.8% in November, slower than the 3.4% fall recorded in October.

IAG to Acquire British Midland

International Consolidated Airlines Group S.A. agreed with Germany''s Deutsche Lufthansa AG to acquire its subsidiary British Midland Limited for £172.5 million in cash.

Gainers & Losers

Enegi Oil plc soared 6.1% to 8.75 pence after the oil and gas explorer received permission to complete a work-over program on its PAP#1 well in western Newfoundland.

Hansteen Holdings plc gained 4% to 72.65 pence after the real estate investment trust and its affiliate completed the purchase of the property assets from The Spencer Group of Companies for £150 million gross or £147.1 million net.

Intandem Films Plc plunged 6.3% to 3.75 pence after the film group reported fiscal year 2011 revenues rose 10% from a year ago to £469,000 from £425,000. Net loss before tax for the period was £464,000 compared to a profit of £3.31 million a year ago.

MedicX Fund fell 0.2% to 74.84 pence after the investor in primary healthcare properties in the UK agreed to acquire a new primary care medical centre in Methil, Fife which is scheduled to be completed in September 2012. The property purchase is anticipated to be £1.9 million.