The Office for National Statistics in the UK released preliminary GDP growth data for the last quarter of 2019 on Tuesday, which met the numbers from the consensus forecasts.
It was observed that the Gross Domestic Product in the UK remained flat at 0 per cent in Q4 of 2019, which measures a 0.5 per cent decline from the recorded data in the previous quarter.
Even though these results matched the preliminary expectations of the market and thereby, the negative market surprise was lessened, British investors have a reason to be wary of the future growth prospects.
In the economic report, it was observed that Household spending rose at its slowest pace since 2016, while government spending, which was needed to offset the impact of curbed investors’ confidence, reached its highest level since 2012.
Expansionary fiscal policy is a short-term remedy that can negate the negative impact of low household spending on the GDP growth rate for the time being; however, it will not be able to act as a long-term substitution for subdued consumer confidence.
UK GDP Growth Rate. Image source: TradingEconomics.com
It is clear that the government is attempting to lessen the negative consequences for the British economy stemming from the country’s divorce from the EU at the beginning of the month.
However, this strategy bears risks of its own, chiefly, an undesired surge in the budget deficit, which would further harm British consumers down the line.
For the time being, however, the British pound has reacted positively to the news of heightened government spending.
The GBPUSD rallied nearly 0.40 per cent since yesterday, and the pair is currently attempting to get back within the boundaries of the major range spanning between the resistance at 1.33370 and the support at 1.29830.
GBPUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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