Britains GDP rose at 3.2% in the year to JuneEU foreign ministers meet to discuss Russian sanctionsEurope shot itself in the foot with Russia sanctions 10.08am BST Pretty chart from Berenberg Economics 10.01am BST The FTSEs continuing to rise on the back of the buoyant GDP data, up 0.7% at last count, or 46 points at 6731. 9.50am BST Paul Hollingsworth at Captial Economics notes that the tweaks to the initial estimates of GDP, show a slightly less balanced economy than first thought. Todays second GDP estimate confirmed that the economic recovery was strong, but became a little less balanced in the second quarter. Growth in industrial production was revised down from 0.4% to 0.3%, and construction output is now thought to have held steady, where it was previously estimated to have fallen by 0.5%. Meanwhile, output in the services sector is still thought to have risen by a robust 1% in Q2.The strength of the latest retail sales figures and surveys of firms investment intentions alongside a still wide trade deficit in Q2 suggest that the economy is still struggling to rebalance towards the external sector. And with this weeks euro-zone GDP figures highlighting the fragility of the recovery there, the UKs economic recovery seems likely to remain a distinctly domestic-led affair over the second half of this year. 9.47am BST A spokesperson for the Treasury said:Todays figures confirm that our economy has recovered all of the output lost in the Great Recession, and is now bigger than its previous peak in the first quarter of 2008. The governments long term economic plan is working, with the economy growing at its fastest annual rate in six years. But the job is not yet done and so we will go on making the realistic assessment of what needs to be done to secure a brighter economic future. 9.46am BST A bit more detail on the UK GDP figures. Yearly growth of 3.2% is the fastest growth since the fourth quarter of 2007. It beat analyst expectations that it would remain unchanged from the initial estimate of 3.1%. Services output was up a healthy 1% on the quarter, while industrial output was 0.3% higher. Construction was unchanged. 9.34am BST Britains GDP grew at 3.2% in the year to June, the fastest rate of growth since before the financial crisis. The data is the first revision of second quarter GDP data. Growth over the quarter remained unchanged from the initial estimate of 0.8%. 9.08am BST Interesting graph showing a troubling (from the EUs point of view) divergence in industrial production from Europe and the US. 8.50am BST Overnight, Japan said it would consider cutting growth forecasts for the full year. Masahiro Hidaka at Bloomberg reports:The Bank of Japan may cut its growth forecast for this fiscal year for a fourth time, as exports fail to bolster an economy weakened by Aprils sales-tax increase, according to people familiar with the central banks discussions. 8.43am BST Markets have opened higher, as investors bet on more central bank support following miserable economic data. 8.32am BST EU foreign ministers have interrupted their summer break to meet in Brussels today, to discuss a response to Russias food import ban, as well as aid for Iraq. Of the 28 EU foreign ministers, 20 are expected to attend. An EU official said ministers would assess the consequences of possible measures and decide whether to legally challenge Moscow. He also noted that filing a suit to the World Trade Organization is the prerogative of the European Commission, however, the ministers could send out a political signal backing such a move. Ria Novosti (a Russian news service) reports:The EU representative stressed that discussing new sanctions against Russia is not on the agenda. With regard to a new round of economic sanctions, I think it is a little bit too early at this stage, he said.Also, the Foreign Affairs Council meeting is to clarify the future of contacts between Brussels and third countries which can potentially replace European states in food exports to Russia. The diplomat said the EU was not going to ask these countries to join the sanctions, but would explain them the reasons for anti-Moscow economic restrictions. 8.22am BST The EU has pledged to support farmers hit by the Russian ban on food imports from the West. Euractiv reports:The European Commission, the EU executive, has already announced support for peach and nectarine growers which had already been suffering a price collapse that has since been exacerbated by the Russian ban.In all, EU farm exports to Russia are worth around 11 billion a year, roughly 10% of all EU agricultural sales. 8.08am BST Hungary is heavily reliant on energy imports from Russia and this year signed a 10bn deal with Russian power company Rosatom to expand Hungarys only nuclear power plant. Prime minister Viktor Orban said today: The EU should not only compensate producers somehow, be they Polish, Slovak, Hungarian or Greek, who now have to suffer losses, but the entire sanctions policy should be reconsidered. Why should we jeopardize the EU economy that begins to grow? If there is a crisis situation, it should be solved by other means than meaningless sanctions. Who profits from [the] EU economy decreasing, Russias economy having troubles and Ukraine economically on its knees? 7.44am BST My colleague Jennifer Rankin would disagree. She argues that Russians will pay the heavier price.The west has banned Russian companies from taking its credit or buying its most advanced technology. Russia, in contrast, has stopped its own people from eating food they enjoy and made their grocery bills more expensive just as the economy teeters on the brink of recession. It is impossible to predict how long this economic war will drag on, but we already know who is paying the biggest price. 7.42am BST The prime minister of Hungary Viktor Orban has called for a rethink of sanctions towards Russia. He said in a radio interview:The sanctions policy pursued by the West, that is, ourselves, a necessary consequence of which has been what the Russians are doing, causes more harm to us than to Russia. In politics, this is called shooting oneself in the foot. 7.37am BST Weve got the latest UK GDP data coming out at 9.30am, which should show the Britain faring considerably better than its European counterparts. Second quarter GDP growth is expected to come in unchanged at 0.8% on the quarter, and 3.1% from the second quarter last year, contrasting sharply with this weeks weak European numbers. 7.32am BST European markets are expected to open higher, after a slew of poor economic data from the eurozone yesterday. The news got into the territory of so bad its good, as investors started betting on more central bank support. Michael Hewson of CMC Markets writes:With prices falling sharply across the euro area, the siren calls for the European Central Bank to do more are starting to become deafening. With these calls for full blown QE getting louder and louder it would appear that markets are betting that Germany and the Bundesbank will ultimately bend to the will of the crowd, hence yesterdays drift higher.Evan Lucas, strategist at IG, suggested investors were refocusing their attention away from geopolitical risks and back to central bank policy, after weak US retail sales and downbeat gross domestic product reports across the eurozone highlighted that low interest rates would continue to support markets. Continue reading...
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