UK’s Office of National Statistics released preliminary GDP data today. Second quarter GDP came in at 0.2% quarter-on-quarter, which is in line with expectations. Despite the figure being lower than the previous quarter’s 0.5% , the markets initial reaction was relief that things weren’t worse given the problems the economy faced in Q2.
This caused Sterling to surge by 85 pips against the Dollar within 5 minutes, climbing from the pre-news level of 1.11626 to 1.6412.
What gave more optimism to the markets was when the Office of National Statistics stated that had it not been for one-off factors, such as the Royal Wedding holiday and Japan tsunami effects on supplies, then growth would have been even higher at 0.7 percent quarter-on-quarter.
British finance minister George Osborne on Tuesday welcomed news that the economy expanded in the second quarter, saying it showed Britain was continuing to grow and create jobs.
In a statement released after official data showed the economy expanded by 0.2 percent between April and June, Osborne also reiterated the government would stick to its plans to reduce the budget deficit over the next four years.
“The positive news is that the British economy is continuing to grow and is creating jobs,” Osborne said in a statement.
“Our economy is stable at this time because this government has taken the difficult decisions to get to grips with Britain’s debts. Abandoning that now, as some argue we should, would only risk British jobs and growth,” he said.