UK Growth Stalls In Feb

On the back of the IMF warnings earlier this week that the UK was at risk of being the worst performing economy in the G7 this year, today’s UK GDP figures for February offered little argument. GDP was seen at 0% on the month, a sharp drop from the  0.4% seen in January and below the 0.2% forecasted. According to the ONS, the widespread industrial action across the month was the main catalyst for the loss of economic momentum. Specifically, the teachers’ strikes across the month saw a 1.7% negative contribution from the education sector, which was the largest drag on growth.

Fears For UK Economy

The data is adding to fears that the UK economy is headed down a hard path. With inflation still at highly elevated levels and traders anticipating the need for further BOE tightening in coming months, growth prospects in the UK appear murky. There were some positive notes, however. Construction was seen rising 2.6% on the month and, on a quarterly basis, the economy grew 0.1% in the three months to February. Commenting on the back of the data, UK chancellor Hunt was quick to focus on this aspect of the data and optimistically declared that the UK will avoid a recession this year (contrary to the IMF’s forecasts) thanks to the fiscal measures taken by the government.

Technical Views

FTSE

The rally in the FTSE off the March lows has seen the index recovering sharply. Price recently broke above the 7678.8 level resistance and is now attempting to break out above the bearish trend line from YTD highs. However, price is currently stalled at a test of the 7834.7 level. With momentum studies bullish, the focus remains on an eventual break higher and test of current YTD highs while 7678.8 holds as support.