UK Economic Indicators

The UK economy is characterized as service oriented. Thus it is important to follow the numbers of the services sector. The following represent some of the most important indicators of the UK economy you should pay special attention to.

Unemployment Rate Indicator

The Office of National Statistics conducts a survey on the employment rates within the country on monthly basis. It aims to divide the working-age population into the following categories:

• Employed
• Unemployed
• Not part of the labor force

The survey provides detailed information on each of the presented above groups. The survey provides an insight on the labor market trends. Shifts in employment across different industrial sectors, hours worked unemployment rates and etc. are provided in the survey. Its importance to forex market traders is stressed by the fact that the employment survey gives an overall view on the strength of the economy of the UK.

Gross Domestic Product (GDP) Economic Indicator

The GDP is used to measure the total amounts of goods and services that has been produced and consumed within the UK. It is reported every quarter by the Bureau of Statistics. In order to calculate it households, businesses, government expenditures and net foreign purchases are summed. In order to transfer output from current prices into constant-dollar GDP the GDP deflator is used. This is done in order to get a view on UK's position in the business cycle. If growth is experienced at high levels, then it is viewed as inflationary. On the other hand, if it is experienced at low or negative levels, then it is referred to as being recessionary.

Retail Price Index (RPI)

In order to estimate the changes in the prices of a basket of consumer goods and services the RPI is applied. The RPI-X is in the focus of attention by forex market traders since it doesn't include data on the interest payments of mortgages.

Industrial Production (IP) Index

In order to find information on the output (i.e. the physical quantity) of UK in the manufacturing, mining and quarrying, electricity, gas and water supply you should refer to the industrial production index. It includes the production of goods and power, which is done for the UK market as well as for export outside the country. The IP index gives a good view on the actual condition of the economy.

Purchasing Managers Index (PMI)

The Chartered Institute of Purchasing and Supply conducts a monthly survey which summarizes the findings in the PMI. This index includes seasonally adjusted estimations of production level, inventory, supplier deliveries (are they coming faster or slower), employment and new orders from customers. The economy is expanding if the value of the index is above 50. On the other hand, the economy is contracting if the value of the index is below 50.

House Prices Indicator

House prices are important to watch since the housing market is the major source of growth for the UK's economy. In the short term, strong house prices are conducive to increased consumer spending and economy boost, and suggest that interest rates need to rise. Thus, this will lead to a positive movement of the GBP in the short term.

However, things get complicated in the long term, especially since a significant slowdown in this sector can destabilize the UK economy as a whole.

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