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Why is a 2015 revision in data important?

22 Aug 2017

Jack Turner, Research Analyst

The latest update provides an important revision to 2015 data, economic news impacting financial markets out of the UK, EU and US and flags three pieces of news out later this week. We also provide a portfolio update.



Britain's current account deficit, already the biggest among the major economies, was even bigger in 2015 than previously thought, based on new calculations by the Office for National Statistics. Although it has recently narrowed, it remains near levels that could cause a currency crisis for less developed countries. The change is due to more interest being paid out to foreign holders of corporate bonds than estimated. It reminds investors of the Bank of England’s Governor’s speech of our need for the “kindness of strangers”.


UK retail sales rose by 0.3% month-on-month in July, helped by stronger spending on food versus all other main sectors which showed a decrease. Food prices grew by 1.5% having fallen by 1.1% in June. But while data for June was revised down from 0.6% to 0.3%, the year-on-year growth of 4.1% in July was encouraging and seems to shows that despite the headlines and numbers around household incomes being squeezed, consumers are continuing to spend. This supports the UK economy given that consumer spending represents some 65% according to 2015 World Bank calculations.

The Eurozone’s GDP expanded by 0.6% in Q2 2017, with the year-on-year growth rate estimated at to 2.2%. This was 0.1% higher than initially estimated. Germany, the region’s largest market, kept pace with the Eurozone average, although France, the second-biggest economy, grew only 0.5% and Italy also lagged with 0.4%. Spain meanwhile had its best performance in three years, expanding by 0.9%. In the Netherlands, GDP grew 1.5% in Q2 alone, its fastest pace of growth since the launch of the region’s single currency in the year 2000.

The minutes of the latest Federal Open Market Committee meeting showed there were considerable differences of opinion as to whether the current weakness of US inflation was temporary. The continued state of the labour market led some central bankers to worry that the economy was in danger of “substantially overshooting full employment” and flagged the complications this could cause. Meanwhile most thought inflation would remain below 2% for longer than had been initially expected, but that it would then pick up. The bankers would like to raise rates to give them the opportunity to then lower rates in the event of an economic downturn, but need inflation to be one the rise to justify such moves.

7IM’s investment team has moved 3% of its portfolios out of emerging market local currency bonds and into Japanese Yen in all but the most adventurous of its risks profiles. Japan has a very stable economy that pays very low interest rates. So when financial markets are faring well, domestic investors seek yield outside of the country. When negative news threatens, however, investors repatriate funds and there is typically a spike in the value of the Yen. With investors having to take on a lot of risk in the case of most asset classes, with not much more in the way of future potential returns, 7IM believes that this scenario could be repeated. Recent rhetoric between President Trump and North Korea’s Kim Jong-Un also has the potential to cause Japan’s investors to seek safety at home. The move also reduced emerging market currency risk in 7IM portfolios.

23 Aug –US New Home Sales // 23 Aug –Eurozone Consumer Confidence // 24 Aug –UK Q2 GDP Estimate


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The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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