Public sector net borrowing comes in better than expected
• Encouraging figure before Q1 GDP released but moderate improvement is not what is needed
• Retail sales and mortgage approvals also gone up but “not game changing”
Data published by the Office for National Statistics today showed the UK’s Public finances were better than expected in March. Government borrowing came in at £23.4 billion, whilst most economists had forecast a figure of £24 billion.
Sterling rallied against the US dollar and euro in response to the data, from a pre-announcement figure of $1.5420 to $1.5445 and against the euro from €1.1505 to €1.1520.
Mark Bolsom, Head of the UK Trading Desk says, “The best we can say about this figure is that the government will be massively relieved they haven’t overshot their target and offers some encouragement before GDP comes out tomorrow. But frankly, moderate improvement is not what we need. The markets will be in limbo until after the general election and they need to know how the deficit is going to be slashed. That’s the defining issue. Public spending has got to be cut and taxes will probably have to go up, but the markets need to know when.
“Retail sales and mortgage approvals have also gone up this morning, but these figures are not game changing. The UK’s burgeoning deficit really is the key issue.”