U.K Housing Weaken Further, Lowing Growth Prospect for the New Year

U.K. November BBA mortgage approvals hit just 17.8k compared to revised 20.8K in October, resulting in a 61% decline from a year earlier. Weakening demands paired with the downturn in the financial market has certainly take a toll on Europe’s second largest economy, and conditions may only get worse in 2009 as the economy heads into a recession.

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• GBPUSD – U.K. 3Q final GDP was unexpectedly revised down to -0.6% from -0.5% in the preliminary release, the largest decline in almost 18 years, while the annual rate of growth held steady at 0.3%. The breakdown of the report showed household consumption was confirmed at a rate of -0.2%, which is the largest decline since 1995, and conditions are likely to deteriorate even further as consumers continue to face falling home prices paired a weakening labor market. Meanwhile, exports were revised higher to show a 0.3% increase versus a 0.3% drop. However, imports were also revised higher, to 1.0% from 0.1%, with net exports remaining a drag on overall growth. Meanwhile, U.K. 3Q current account deficit widened to GBP 7.72B and 2Q deficit was revised down sharply to GBP 6.42B from an intial reading of 11.0B. In addition, U.K. November BBA mortgage approvals hit just 17.8k compared to revised 20.8K in October, resulting in a 61% decline from a year earlier. Weakening demands paired with the downturn in the financial market has certainly take a toll on Europe’s second largest economy, and conditions may only get worse in 2009 as the economy heads into a recession.

• EURUSD – The Euro-Zone current account deficit narrowed to 6.4B from a revised reading of 8.8B as a result of lower energy prices. The breakdown of the report showed that the services balance posted a 2.8B surplus, while the income and transfer balance deficit surge to 9.7B from 6.6B in September. Despite the minor improvement in the current account, trade conditions are likely to deteriorate further as demand from home and abroad falter. Growth prospects for the Euro-Zone has weakened considerably throughout the second half of the year, and the economy is likely to face its worst recession in 16 years as global credit conditions remain far from normal.


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