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Guess what ! UK economy continues to shrink

April 25th, 2009 by admin | Filed under Daily News, Recession, The Budget.

There are times when words are superfluous, and stating what is apparently obvious becomes the norm. And the latest set of statistics released in the aftermath of Chancellor Darling’s budget statements on Wednesday will hardly have anyone fall off their overstuffed armchair in surprise. The UK economy is shrinking! Shrinking we already know, how fast or slow might be too much information for the recession weary UK citizen.

Well the good news is that the UK economy did indeed shrank in the first three months of 2009, but at about the same pace as it did in the final quarter of 2008. The question is that is this bad news or less bad news? Figures to be released are expected to show that UK gross domestic product (GDP) will have retarded by 1.5% from January to March, from 1.6% in the last quarter of 2008.

This encouraging news follows a statement issued after the Budget on Wednesday by the Institute for Fiscal Studies (IFS) warning that

Every UK family would be paying an additional £2,840 per year by 2017-18 through paying higher taxes or subsidising public spending.

The cheery trend continued with the Lloyds Banking Group confirming that they are to cut close to 1,000 jobs over the next two years, particularly in their auto finance unit, which under the current credit crunch regime is “no longer financially viable”. The bank has a current total workforce of 140,000.

Following the merger of Lloyds TSB and HBOS, the group momentarily became the largest provider of car finance in the UK.

Analysts predict that Lloyds Banking Group, in which the Government holds a 43% stake will be not only be making further job cuts but will also close a large number of branches in an effort to increase efficiency and cut costs.

John Varley, chief executive of Barclays Bank announced yesterday that despite his belief that the recession will be longer and deeper than Treasury predictions, the bank will be increasing their lending in 2009 by £11billion. The money to be lent will be allocated evenly, with £5.5billion to be set aside for consumers and £5.5bn for the commercial sector.

On the stock exchange , the retail sector was the driving force with Debenhams leading the FTSE 250 with gains of 21.65 percent on the back of news that its pre-tax profits and sales were much higher than predicted in the first half of the company’ fiscal year. Doing well, but not nearly as well as Debenhams was the 100 clothing retailer Next whose shares rose by 6.55 percent.

The U.K.’s second largest software producer, Autonomy Corp announced an increase in first quarter revenue rose of $25 million driving their shares forward by 2.6 percent (32 pence to 1,289)

London’s largest bus operator, the Go-Ahead Group Plc have announced that fiscal third-quarter trading matched their forecasts and that they are confident of achieving their targets for the full year ending in June. On the news their shares 0.3 percent (3 pence to 1,200).

The largest U.K. sporting-goods retailer Sports Direct International Plc announced that their recent sales had posted “higher than expected” gains, meaning that the company’s annual profit will meet forecast. On the day, SDI shares jumped by 13 percent (7.75 pence to 69).

Not doing so well amid “very difficult” market conditions are Smiths News Plc, the U.K. magazine and newspaper wholesaler, on the announcement that their first-half profit had fallen by 13 percent. Despite the gloom, their shares gained 3.2 percent (2.75 pence to 89.75)

U.K.’s largest magazine retailer WH Smith Plc announced that their first-half profit had dropped by two percent. This news might have been construed as positive as their shares rose by 5.1 percent, (20 pence to 410).

In London, the FTSE 100 dropped a mere 12 points to close at 4,018.23 while the FTSE 250 managed to gain 21 points to close at 7,181.53 on the day.

Sterling continued to fall, albeit slightly against the dollar and the Euro and rose slightly against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4654

Pound/Euro 1.1149

Pound/Japanese Yen 142.09

Pound/Swiss Franc 1.6825

Wall Street shares enjoyed a fair day on trading

The Dow Jones Average added 70.48 to close at 7957.06 NASDAQ tottered forward a mere 6.09 points to finish the day on 1652.21

There might not have been tears in too many eyes with the news that software giant Microsoft have announced – its first quarterly drop in profit and revenue for 23 years. The company announced that sales in the first three months of 2009 have fallen by 6% to $13.65billion from the corresponding period in 2008. Profit has dropped by 32% to $2.98billion for the quarter. The obvious explanation was that demand for Microsoft products have been hit by falling sales of personal computers.

Feeling the pinch also are United Parcel Service (UPS), the world’s largest package delivery company. The company announced a severe fall in profits for the first quarter as fewer parcels (possibly containing Microsoft Windows of Office software) are in circulation during the global economic downturn.

In the Asia-Pacific region markets were higher, although Taiwan’s Taiex was 0.18 percent lower to 5,875.24 on the session.

In Tokyo, the Nikkei 225 was up 1.37 percent to 8,847.01 while the Topix index added 1.15 percent to 839.5, while the Hang Seng was 2.26 percent higher to 15,214.46 in Hong Kong

Oil prices were up slightly in New York, as were precious metals prices, but copper saw declines and grains prices were mixed

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