LIVEBUSINESS LIVE: GDP growth surpasses expectations
By Live Commentary
Published: 07:42 BST, 11 August 2023 | Updated: 08:03 BST, 11 August 2023
The FTSE 100 will open at 8am. Today, we have reports and trading updates from companies such as Heathrow, EMIS Group, UnitedHealth Group, and De La Rue. Read the latest Business Live blog for Friday 11 August below. If you’re using our app or a third-party site, click here to read Business Live.
FCA cautions asset managers to justify fees charged on funds
Asset managers have received a warning from the Financial Conduct Authority to justify the fees they charge on their funds. The review conducted by the authority reveals that profitability concerns are influencing the amount charged to clients. The rise of passive investing in recent years has intensified competition in the industry, leading some funds to lower their fees.
GDP growth at 0.5%: Prepare for further rate hikes
According to Matt Britzman, an equity analyst at Hargreaves Lansdown, the FTSE100 is expected to open lower today, relinquishing the gains seen in yesterday’s session, despite new GDP data showing that the UK economy did not stagnate in the second quarter, as predicted by some economists. He states that June is responsible for the better-than-expected result, with 0.5% growth propping up the quarter following a slight decline in May. While these numbers push the possibility of a recession further down the line, the UK economy remains trapped in a period of low growth. With future interest rate hikes already factored in by the markets, an immediate recovery seems unlikely.
Britzman also discusses how UK investors have found hope in June’s positive inflation figures. The latest GDP data should bolster this sentiment, as both economic growth and investor confidence have seen improvement in early August after three consecutive months of declines. However, the UK’s inflation performance remains concerning compared to other global economies, indicating that investors should brace themselves for further rate hikes. Britzman acknowledges some positive signs in the mortgage market, with key lenders reducing rates on fixed-term mortgages. Nevertheless, he warns that those looking to buy a first home, remortgage, or move house still face challenging conditions, and the upcoming CPI print will be closely watched.
IoD: ONS data reveals worrisome decline in business investment despite solid growth
Kitty Ussher, Chief Economist at the Institute of Directors, finds the latest data encouraging, showcasing a strong performing economy in June. Retail and manufacturing experienced decent growth, aided by a rebound effect from the previous month due to the extra bank holiday for the King’s Coronation. Ussher highlights that across the full three months of the second quarter, economic growth has accelerated compared to earlier in the year, although these initial estimates are subject to revision. Falling input prices have benefited car production, while consumer demand has remained resilient, supported by favorable weather conditions in June.
However, the quarterly data also reveals a concerning decline in business investment in ICT and machinery following the expiration of the government’s super-deduction allowance at the end of March. Expenditure on scientific R&D, advertising, and market research has also decreased, which could indicate potential challenges ahead.
GDP growth exceeds expectations in June
According to data from the Office for National Statistics, the British economy experienced faster-than-expected growth in June, with companies attributing this to the additional May bank holiday. GDP grew by 0.5% for the month, surpassing expectations of 0.2%, while growth for the overall second quarter was 0.2%. Chancellor Jeremy Hunt expressed optimism, stating that the measures taken to combat inflation are starting to have an impact and setting the foundations for economic growth.
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