UK Output Declines, Deficit Widens

Arthi Gupta
09 Oct, 2012
New York City

The UK indexes fell after manufacturing output declined and trade deficit widened in August. SSE completed the acquisition of Endesa Ireland for

[R]5:30 PM London – The UK indexes fell after manufacturing output declined and trade deficit widened in August. SSE completed the acquisition of Endesa Ireland for €308 million.[/R]

The UK indexes edged lower after the IMF lowered UK economic growth outlook and the manufacturing output declined and trade deficit widened in August.

European Central Bank president Mario Draghi issued cautious outlook for the region and the European Stability Mechanism was put in place with a maximum lending capacity of €500 billion.

The International Monetary Fund revised global growth estimate for 2012 and 2013 on increased risk and deterioration in prospects. The Washington based fund released its latest World Economic Outlook ahead of the G7 Finance Ministers meeting in Tokyo.

The IMF lowered global growth outlook to 3.3% this year from the previous estimate of 3.5% and 3.6% in 2013.

The IMF projected the UK economy to contract 0.4% this year from an earlier estimate of 0.2$ but expand 1.1% in 2013 from the previous estimate of 1.4%.

However, Prime Minister David Cameron ruled out any concession in the austerity measures and said today that it is not wise to borrow money and expand the government and increase the debt.

The UK is slowly and steadily moving toward a recession with a huge budget deficit.

In London, the benchmark index FTSE 100 declined 31.49 or 0.5% to 5,810.25 and the pound edged lower to $1.5986.

UK Output Declines

The UK manufacturing output declined 1.1% on a monthly basis in August, following a 3.1% rise in July, data released by the Office for National Statistics showed today.

Industrial output declined 0.5% in August compared to the 2.8% rise in July and annually manufacturing output dipped 1.2% in August from the 0.7% drop in July.

Industrial production slid 1.2% in August compared to the 0.8% fall in July, the 17th consecutive monthly decline on an annual basis, the ONS said.

UK Deficit Widens

The UK trade deficit widened to £9.8 billion in August from £7.3 billion in July, data released by the Office for National Statistics showed today.

Exports dropped 4% from a month ago to £24.6 billion and imports increased 4.5% to £34.5 billion in August.

The deficit on trade in goods and services rose to £4.2 billion in August from £1.7 billion in July. The services trade in the month was a surplus of £5.7 billion during the month.

Barclays to Acquire ING Direct UK

Barclays Bank PLC agreed to acquire the deposits, mortgages and business assets of ING Direct UK.

Under the terms of the transaction, Barclays will acquire a deposit book with balances of £10.9 billion and a mortgage book with outstanding balances of £5.6 billion. The transaction is expected to be accretive to return on equity immediately.

Gainers & Losers

BHP Billiton plc rose 0.4% to $62.05 after the diversified natural resources company priced a five-year A$1 billion note issue under its Australian Medium Term Note Program.

SSE plc fell 0.7% to 1,426.44 pence after the gas supplier completed the acquisition announced in June of Endesa Ireland Ltd from Endesa Generacion SA for €308 million or £246 million plus an estimated €53 million or £42 million for working capital.

Wolseley plc climbed 0.3% to 2,696.82 pence after the plumbing and heating products distributor agreed to acquire Davis & Warshow, Inc. a residential and commercial plumbing supplier in the New York metropolitan area for £49 million.