Revised UK GDP Shrinks at 1.9%; Miners Rise

Darlington Musarurwa
22 May, 2009
New York City

UK first quarter GDP shrink was left unchanged at 1.9%. Manufacturer preferred to liquidate inventories and conserve cash and consumer spending declined. The GDP declined 4.1% from a year ago. UK miners closed higher after Goldman Sachs speculated capacity constraints for copper and iron ore miners.

[R]6:00 PM London, 1:00 PM New York – UK first quarter GDP shrink was left unchanged at 1.9%. Manufacturer preferred to liquidate inventories and conserve cash and consumer spending declined. The GDP declined 4.1% from a year ago. UK miners closed higher after Goldman Sachs speculated capacity constraints for copper and iron ore miners.[/R]

The estimate of the UK GDP first quarter contraction was unrevised to 1.9% on weak output in manufacturing, construction and household spending. The quarterly declined was 4.1% from a year ago first quarter.

The economy declined at 0.6% in the third quarter and 1.6% in the fourth quarter of 2008.

The shrink in the economy has accelerated in the first quarter as world traded declined, financial markets reached to their multi-year lows in the first week in March and unemployment increased in the period.

Nearly one third in the economic contraction was from the liquidation in inventories as manufacturers struggled to conserve cash. Consumer spending fell 1.2% and investment declined 3.8%.

Only manufacturing data was revised up to a decline of 5.5% from the previous estimate of 6.2%.

Gross fixed capital formation declined 3.8% in the quarter and plunged 8.3% from a year ago quarter. But, a decline in trade deficit did not help much. Deficit fell to £7.3 billion from £7.6 billion in the fourth quarter a year ago.

The pound was nearly unchanged and hovered around $1.58 and at 1.134 euros. The FTSE 100 index increased 0.5% or 19.82 to 4,365.29.

Gainers & Losers

British Airways declined 3.8% to 156.7 pence after it reported full year revenues gain of 2.7% to £8.92 billion and net loss of £375 million. The airline will trim staff, park planes and lower executive salaries to lower operating costs.

Brixton Plc surged 24% to 61.75 pence after Segro Plc indicated its interest in the company. Brixton, facing liquidity crunch recently sold industrial properties to AEW Europe for £70.25 million. The warehouse and office park manager stock has declined 78% in the last one year. Segro is seeking merger by exchanging share only.

A surge in copper price in the last five weeks has lifted stocks of miners. Kazakhmys surged 6.1% to 682.50 pence and Vedanta added 3.7% to 1,548 pence.

Goldman Sachs speculated that iron ore and copper miners are expected to face capacity constraint by 2011 and revised price targets for Vedanta, BHP Billiton and Anglo American.

Liberty International said that 77% of shareholders have accepted 95.2 million share offering.

Sibir Energy surged 135% to 410 pence after Russia based Gazprom indicated that it will increase its stake in the company to 29.9% from its stake of 16% in April. Renaissance Capital that is conducting the share purchase on behalf of Gazprom did not indicate purchase price per share.

Sibir has requested shareholders to seek at least 500 pence per share, the price at which Gazprom conducted recent purchases.

Earnings Review

British Airways plc, the world’s largest international airlines said full-year sales rose 2.7% to £8.92 billion from £8.76 billion a year ago. Net loss in the year was £375 million or £32.6 per diluted share compared to net profit of £712 million or £61.4 per share a year ago.

British Airways plc, in the last one year traded as high as 284.25 pence in August 2008 and as low as 105.40 pence in October 2008. Based on the yesterday’s closing price of 153.00 pence the company has market cap of £1.75 billion.

Marston’s PLC, the U.K. pub owner said first-half revenues fell 2.8% to £306.5 million from £316.4 million a year ago. Net profit in the year fell 48% to £13.2 million or £4.8 per diluted share compared to net profit of £24.4 million or £8.8 per share a year ago.

Marston’s Plc, in the last one year traded as high as 227.00 pence in August 2008 and as low as 81.00 pence in November 2008. Based on the yesterday’s closing price of 166.75 pence the company has market cap of £445.58 million.