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The Home Office is allegedly concocting an advertising campaign to deter the tsunami of Bulgarian immigrants that is expected when restrictions are lifted next January. It shouldn’t be too difficult to put them off. A loaf of bread in Bulgaria costs 35p. Diesel is a pound a litre. Airports remain open when it snows and motorists can afford a second set of tyres for the winter. Bulgaria’s 16.3% ratio of government debt to GDP beats Luxembourg’s 18.3% and makes Britain’s 85% look profligate. The country’s economy grew by roughly 0.5% in 2012 shows all the more reason for us to move over there and send money abroad.
In its campaign the Home Office would do well to draw attention to the 0% by which the UK economy expanded last year. It isn’t as if nobody else spotted it. Friday’s data showed gross domestic product shrinking by -0.3% in the fourth quarter of 2012 and investors were not slow to show their disapproval by shrinking the value of the pound against most major currencies.
It was not a complete washout for sterling though. The pound held its own against the US and Australian dollars. It gained half a Japanese yen and three quarters of a Canadian cent. It could well be that investors had been so pessimistic about the Q4 GDP figure that they were relieved to see it was “only” -0.3%.
The yen’s decline was, to a large extent, an accident of timing. Since the beginning of the month the sterling/yen foreign currency exchange rate has gone nowhere. More accurately, sterling has risen and fallen by a total of more than 25 yen in the last four weeks but the result is zero net change.
For the Canadian dollar the problem was inflation – or the lack of it. The headline consumer price index (CPI) rose by an unchanged 0.8% in the year to December and the core CPI, the number upon which the Bank of Canada bases its monetary policy, was up by 1.1% after rising by 1.2% in the year to November. The figures diminished the prospect of higher Canadian interest rates.
This week got off to a slow start with Australians on holiday for their national day and an unusual lack of economic statistics from Japan. The rest of the day holds little more promise for those unable to become excited by Italian consumer confidence, Euroland money supply, US durable goods orders and pending home sales.
Sterling’s failure to be panicked by the disappointing Q4 GDP figure could be significant. The pound has fallen by as much in the last month against the euro as it fell in the previous six. On its own, that fact is not sufficient to justify a reversal of sterling’s decline but if investors couldn’t sell it on the GDP news they might have lost their appetite for doing so.