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UK Economic Growth Slows

03 Oct 2017

Jack Turner, Research Analyst

We look at UK GDP numbers, the Bank of England’s latest statement on interest rates, Eurozone confidence and proposed US corporation tax changes. We also flag three key data announcements this week and give an update on 7IM’s equity holdings.

 week at a glance

The UK's economy grew at its slowest annual rate since 2013 in Q2 2017 according to revised numbers from the Office for National Statistics (ONS). Gross Domestic Product (GDP) grew by 1.5% year-on-year, down from the earlier 1.7% estimate, although the quarter-on-quarter number remained unchanged at 0.3%. However, on the service side, which represents 79% of UK output, the sector contracted by 0.2% month-on-month in July from 0.5% in June. The year-on-year figure was also lower.



The Bank of England’s Governor, Mark Carney, confirmed that the central bank may raise interest base rates on 2 November. Speaking ahead of the ONS GDP data release, he did however state that as far as the Bank was concerned “all indications are that if it [the economy] is [on track], in the relatively near term we can expect that interest rates will increase”. However, while providing the clearest guidance yet on the chance of rates rising, Carney also stated that any rate rises would be “will be to a limited extent and gradual” given the concerns about consumer lending in the UK.



The European Commission’s Economic Sentiment Indicator continued its recent upwards trend, rising to 113 in September, up from 111.9 in August. This was the strongest reading since June 2007. At a national level, the Netherlands (+1.9) and Italy (+1.8) saw the largest rises, followed by Spain (+0.6), Germany (+0.5) and France (+0.4). Breaking out the figures, confidence was up across sectors too: industry confidence (+1.6); services confidence (+0.2); consumer confidence (+0.3); retail trade confidence (+1.4); and construction confidence (+1.6) were up. The only confidence number down was in financial services’ confidence (-6.8).



Donald Trump announced plans for US corporate tax reform, which included proposals to lower the corporate tax rate from 35% to 20% and a move to a ‘territorial’ system in which US companies would mainly pay tax on US earnings only. Energy stocks are expected to be among the main beneficiaries of the proposals since they pay some of the highest marginal rates of tax in the US. Conversely, IT companies would be among those that benefit the least since they already among those that pay the least tax.


7IM completed its formal quarterly review of its investment positions and made a number of changes to its equity investments as a result.

We increased European equity investments.
There was also decision to increase our holdings in Japanese equity to align to our strategic asset allocation position, which we had increased in June.
We reduced our exposure to emerging market equity across our portfolios.
We also added Frontier Market exposure in our Balanced strategy and increased holdings in Moderately Adventurous and Adventurous strategies.

More updates on other changes being made to portfolios will be published in the coming weeks.

04 Oct – ECB Non Monetary Policy Meeting  //  06 Oct UK (Halifax) House Price Index   //   06 Oct US Non Farm Payrolls


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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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