Home Create my own Portal Premium function, contact us! Premium function, contact us! Premium function, contact us! Premium function, contact us! 
Username:
Password:
Create a account
Making stock and economic news easier to read, bookmark and use!
 
  Submit Article Add a Feed Watchlist
Moodys UK Downgrade - Global Economics

Moody's UK Downgrade

Global Economics Weekly Brief



Moody’s, the rating agency, downgraded the UK’s sovereign credit rating by one notch, from AAA to AA1. Despite the headlines, this shift is unlikely to have a material effect on the UK economy. It is more a symbolic and political loss. The markets had, in effect, downgraded the UK already. Sterling has been falling for several weeks, for the same reasons that prompted Moody’s to change the UK’s credit rating.
* See Special Moody's UK Downgrade Report below...



The key concern is the UK’s medium term outlook. Moody’s now expects that sluggish growth “will extend into the second half of the decade”, making the government’s fiscal consolidation process harder. More pressure on the UK government to cut borrowing rapidly!

Bank of England divided. Three out of the nine members of the Monetary Policy Committee (MPC) voted for a £25bn increase in quantitative easing (QE) in February. David Miles was the only member arguing for more stimulus the month before. Most surprising was the shift in stance by Governor King, who recently played down the effectiveness of further QE. The MPC also discussed alternative stimulus measures, such as rate cuts or buying assets other than Government Bonds. Mark Carney doesn't take over until July, but the new Governor’s pro-active comments may already be having an impact. QE as been and still will be a waste of money and time - Look at history!

UK public finances disappoint. The sale of the 4G spectrum raised £2.3bn for the Treasury, below the anticipated £3.5bn and just 10% of the 3G sale in 2001. This represents another blow – albeit small – to the deficit reduction programme. A weak economy isn’t helping, with corporate tax receipts weaker than expected and welfare spending higher. It looks increasingly unlikely that the deficit will be lower this fiscal year than last. Despite these difficulties, Moody’s noted that the “UK’s creditworthiness remains extremely high” and the other two main rating agencies continue to rate the UK triple-A. UK public finances are still being wasted by civil servants, why?

Sterling continues to depreciate. The UK economy suffered a triple-whammy last week: disappointing public finance statistics; speculation over further monetary easing; with the Moody’s downgrade the final insult. It wasn’t therefore surprising to see sterling weaken further. The pound has fallen by 6% against both the dollar and euro so far in 2013. On the plus side, depreciation provides exporters with a competitiveness boost which should support trade. But a weaker currency is a double-edged sword. The drop in sterling makes imported goods more expensive, evidenced by a rise in oil prices to record high in sterling terms last week. This will not help the squeeze on real take-home pay!

UK unemployment rate down again. Unemployment fell to 7.8% in Q4, down from 7.9% in Q3 and 8.4% a year ago. The employment juggernaut rumbles on, with 154k people finding employment over the quarter. The number of economically inactive people has fallen to the lowest level since the crisis (in part due to changes in the female retirement age). The downside is that Britain's worst recovery in productivity in the post-war period intensified further over the course of 2012. The UK NEEDS FAR MORE EXPORTS!

Earnings growth remained subdued at the end of 2012. Once again, the 1.4%y/y growth in average earnings failed to keep pace with inflation. Over the course of 2012, it has been changes in income tax, increased pensions payouts and unemployment benefits that have helped real disposable income. Public sector average earnings grew faster than private sector earnings in Q4, repeating what happened in Q3. Average earnings growth in the retail, wholesale and hotel & restaurant sectors grew the fastest at 2.4%y/y, while earnings in the construction sector fell again, this time by -0.4%y/y.

Like the Bank of England, US Fed uncertain on what to do. The Federal Reserve left policy unchanged in January, but the minutes show this decision was far from straightforward. The Fed's current policy is to buy $40bn of mortgage-backed securities per month until the labour market improves substantially. Some on the committee wanted the pace of purchases to slow before the labour market had improved, whilst others cited the Great Depression as an example of what can happen when stimulus is removed too soon. In the end, no agreement meant no decision to change course.

Eurozone still in recession? The Eurozone Purchasing Managers’ Index (PMI), covering manufacturing and services, dropped to 47.3 in February from 48.6 in January. This points to another quarter of contraction for the monetary union. The index for manufacturing slipped to 47.8, with a deeper decline only averted due to strong export performance in Germany. The gauge for the service sector meanwhile dropped to 47.3 from 48.6 with domestic demand weak across all regions. A big worry is France. The second-largest member state has been performing like a peripheral economy, leaving Germany shouldering much of the burden in the battle against the Eurozone.

UK credit rating downgrade: not quite platinum, but still gold standard.

Moody's UK Downgrade
Moody’s, the rating agency, downgraded the United Kingdom’s sovereign credit rating from Aaa to Aa1 on 22 February 2013. It gave three reasons for its decision. Economic growth is likely to be slow for the next few years, making the government's fiscal consolidation process harder. Government debt is set to continue rising. High debt makes it harder for the government’s finances to withstand any shocks or surprises that come along. Despite the headlines, this shift is unlikely to have a material effect on the UK economy. It is more a symbolic and political loss. Aa1 is Moody’s second highest rating. It means that the UK has a very strong capacity to meet its financial commitments and is not in danger of defaulting. Moody’s says that the outlook for the UK’s rating is ‘stable’: they do not envisage another downgrade soon. The other two main rating agencies continue to rate the UK as triple-A. So, the UK may no longer be a platinum rated country, but it remains gold standard.

What is a sovereign credit rating and what is the difference between Aaa and Aa1? Like people and businesses, countries are rated on their creditworthiness. A rating provides guidance on a country’s ability to repay its loans and is one of a number of factors that determine the interest rate that a government will pay to borrow. The three main agencies that make credit ratings are Fitch, Moody’s and Standard and Poor’s. When they rate a country they examine issues such as its growth prospects, fiscal position and the effectiveness of government policy making. Countries with a higher credit rating find it easier to access credit and on better terms (e.g. lower interest rates). Triple-A is the highest credit rating. Aa1 is Moody’s second highest rating and represents a very strong capacity to meet financial commitments. Relative to countries with a lower sovereign credit rating, the UK continues to have high economic, financial and governmental strength, and hence its creditworthiness remains very high.

Why has the UK been downgraded? Moody’s gave three reasons for its judgement. It expects economic growth in the UK to remain weak into the second half of the decade. Weak growth has made the government's job of eliminating the deficit and reducing debt on the planned timescale much harder. As a result, deficit elimination and debt reduction will continue into the term of the next UK parliament, increasing the political risks of it being achieved. High and rising debt will make it harder for the government to weather any storms that come along.

What impact will this have on the UK economy? This downgrade does not mean that the UK has defaulted on its debts, nor does it imply that the UK is in danger of doing so in the future. A one notch downgrade could result in increased borrowing costs for the UK as a result of an apparent lower creditworthiness, but the extent of any increase in borrowing costs will depend on the market’s perception of the strength of the UK economy relative to other countries. If investors continue to view the UK as relatively strong and a safe place to invest, then the impact on borrowing costs is likely to be minimal. Both the US and France saw bond yields continue to fall after losing their triple-A rating from one of the main rating agencies. This was partly because investors perceived the US and France to be safe places to invest relative
to alternative investments. Moreover, the possibility of a downgrade is usually known well in advance. Moody’s put the UK on ‘negative watch’ in February 2012 and in November said they would review the UK’s rating in early 2013. Thus, the
likelihood of the downgrade has already been factored into markets. If borrowing costs rise, this would put added pressure on the government’s financial position, making it harder for it to reduce debt and stimulate growth.

How long does a downgrade last and will the UK be downgraded again? A downgrade is not time limited. A further downgrade would take place if there was a material deterioration in the public finances or a weakening in political commitment to reduce the debt. Can the UK be upgraded? Yes. As much as the UK can be downgraded, it can also be upgraded. The UK will be rated Aa1 until the economy grows sufficiently and the ratio of debt to GDP falls by enough to warrant a return to Aaa. Historically it has taken around 10 years for a country that has lost its triple-A rating to regain it.

Moody’s Rating Scale and long term rating examples
Sovereign ratings Corporate ratings

Aaa Canada, Germany, Netherlands Johnson & Johnson, Microsoft
Aa1 France, United Kingdom Canon, Royal Dutch Shell
Aa2 Kuwait, Qatar, UAE 3M, Wal-Mart
Aa3 China, Japan, Korea Coca Cola, General Electric, Toyota
A1 Czech Republic, Israel GlaxoSmithKline, Intel, Samsung
A2 Poland, Slovakia BP, BMW, McDonalds
A3 Malaysia, Malta Vodafone, WM Morrison
Baa1 Mexico, Russia, South Africa BSkyB, Dell, Tesco
Baa2 Brazil, Italy, Slovenia Carrefour, Time Warner, Toshiba
Baa3
Investment grade (prime)
Croatia, Iceland, India, Spain GAP, Marks & Spencer, Sony, Starbucks
Ba1 Hungary, Ireland, Turkey General Motors, ITV, Virgin Media
Ba2 Armenia, Jordan Foot Locker
Ba3 Angola, Nigeria, Portugal Fiat, Nokia, Saks
B1 Fiji, Kenya, Sri Lanka British Airways, Avis
B2 Cambodia, Venezuela, Vietnam DFS Furniture, United Continental Airlines
B3 Argentina, Egypt, Ukraine Alcatel-Lucent, Sears, Tui Travel
Caa1/Caa2/Caa3
Ca/C
Speculative grade (non-prime)
Cuba (Caa1), Pakistan (Caa1), Cyprus
(Caa3), Greece (C)

Source: Moody’s, Bloomberg

World Economic Outlook (WEO)

Coping with High Debt and Sluggish Growth - http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf
The World Economic Outlook (WEO) assesses the prospects for the global recovery in light of such risks as the ongoing euro area crisis and the "fiscal cliff" facing U.S. policymakers. Reducing the risks to the medium-term outlook implies reducing public debt in the major advanced economies, and Chapter 3 explores 100 years of history of dealing with public debt overhangs. In emerging market and developing economies, activity has been slowed by policy tightening in response to capacity constraints, weaker demand from advanced economies, and country-specific factors, but policy improvements have raised these economies' resilience to shocks, an issue explored in depth in Chapter 4.


Global economic outlook for 2013 revealed - United Nations ...
http://www.un.org/en/development/desa/news/policy/wesp2013.html

China Export Growth Collapses as World Recovery Slows - click on the connection below for comprehensive information.
http://www.bloomberg.com/news/2012-08-10/china-july-exports-rise-1-vs-economists-estimate-for-8-.html

10-Step Double-Dip Recession Survival Guide for Entrepreneurs - click on the connection below for comprehensive information.
http://newsusa.myfeedportal.com/i/double-dip-recession-survival-guide

What do you think about this?

ENDS
Note: About the Author Colin Thompson

Colin is a former successful Managing Director of Transactional/Print Manufacturing Plants, Print Management/Workflow Solutions companies and other organisations, former Group Chairman of the Academy for Chief Executives and Non-Executive Director, helping companies raise their `bottom-line` and `increase cash flow`. Plus, helping individuals to be successful in business and life in general. Author of several publications, research reports, guides, business and educational models on CD-ROM's/Software and over 400 articles published on business and educational subjects worldwide. International Speaker and Visiting University Professor.


Read more newly added articles, which you can add to, on NewsUSA-MyFeedPortal: http://newsusa.myfeedportal.com/i/libor-scandal <--- The Largest Scandal The World has Ever Seen - The LIBOR Scandal.


Colin Thompson
DDL: + 44 (0) 121 244 0306

Mobile: 07831 588310

Main T: + 44 (0) 121 244 1802

The Central Banker Problems!

email: colin@cavendish-mr.org.uk

Skype: colin.thompson384

http://www.cavendish-mr.org.uk

http://www.colinthompson.org.uk

Moody's UK Downgrade and the global implications.

Rating: 0 (0 today) - Visits: 710 (25 today)
Read the full article | Bookmark this article(to my MFP account)

Comments on this item:

lzm
10-12-2016 04:53:29

longchamp backpack


prada outlet online


pandora rings


Polo Ralph Lauren


burberry outlet


ray ban new wayfarer


sac longchamp


michael kors


Oakley Holbrook


asics shoes Australia


prada bag


moncler jacket


chanel tote bag


nike jordan shoes


Nike Lebron 12


ugg uk


michael kors us


michael kors


Free Run


abercrombie us


coach outlet


hermes bag


burberry outlet


landing gear


abercrombie paris


polo outlet


kate spade outlet


burberry outlet


Abercrombie Fitch


jimmy choo australia


michael kors tote


oakley frogskins sunglasses


pandora bracelet


moncler uk


oakley frogskins


burberry outlet


ugg boots


chanel bag


nfl jerseys


coach handbags


Coach outlet online


coach diaper bag


nike shoes


ugg slippers


huarache nike


longchamp bag


michael kors purses on sale


nike outlet


prada bags


ugg uk


coach factory outlet


pandora rings


beats studio


asics Australia


prada online


coach online


nike australia


burberry outlet


ray ban glasses


Michael Kors Watches Online


official prada site


abercrombie us


michael kors purses


yeezy shoes adidas


lebron james shoes


asics gel kayano


Adidas Yeezy Boost 350


coach australia


sunglasses hut


pandora charms uk


michael kors outlet store


pandora princess ring


ray ban online


nike lebron james


ray ban aviator


Michael Kors Outlet


polo outlet online


Whitton Lodge Chesterfield Derbyshire UK


coach purses


hermes birkin


burberry


michael kors australia


Oakley Outlet


coach outlet


Ralph Lauren Polo


pandora australia


Pandora bracelet


ray ban prescription glasses


paul smith sale


coach outlet


burberry scarf


moncler outlet


Nike Hyperdunk 2015


tiffany co


michael kors outlet


nike outlet


coach outlet


balenciaga bags


sunglasses sm


clk benz


burberry outlet canada


burberry online


chanel tote


huaraches


air jordan shoes


kate spade outlet


michael kors outlet online


Coach Outlet Store


CHanel Factory Outlet


michael kors bags outlet


canada goose sale


moncler outlet


ralph lauren


michael kors outlet


michael kors totes


Jordan retro


louboutin shoes


burberry online


michael kors handbags


nike air huarache


pandora charms


mlb.com


coach online


prada handbags


kate spade


Hugo Boss Store


michael kors


prada outlet online


shoes online


michael kors outlet


pandora australia


kate spade bags


major league baseball


pandora australia


moncler jacket mens


landinggear


veronique billat


mlb shop


moncler mens jackets


coach handbags


top sunglasses


Kobe 9 Shoes


pandora rings


abercrombie outlet


wholesale


kate spade


shoes sale


moncler jacket


Ray Ban Outlet


Jordan Retro


michael kors outlet online


paul smith


Prada bags


michael kors outlet


burberry outlet online


R.B Sunglasses


michael kors outlet


nike shox


Canada Goose Outlet


mens sunglasses


kate spade handbags


Nike Air Jordan


ralph lauren uk


ugg australia


pandora necklace charms


coach factory outlet online


huaraches shoes


kate spade outlet


ray ban polarized


pandora australia


true religion jeans


china factory sale


prada handbags


michael kors outlet


nike air max


michael kors outlet


moncler us


nike shoes


mlb store


moncler sale


pandora bracelet


sheepskin boots


cheap coach purse


hermes birkin price


michael kors outlet


burberry outlet online


kate spade outlet online


coach outlet store


longchamp outlet


salomon hiking shoes


coach shoes


nike store


louboutin shoes


moncler outlet


nike shoes


Burberry Factory Outlet


véronique Billat


moncler coats


pandora rings


coach outlet


kate spade bags


coach outlet online


Hugo Boss Online


pandora necklace


sheepskin boots on sale


kate spade outlet


nike huarache


asics gel


sunglasses outlet


Michael Kors Canada


abercrombie and fitch


abercrombie outlet


canada goose outlet


coach outlet


pirate system


pandora rings jewelry


Coach Outlet Online


prada tote


michael kors wallet


timberland boots


pandora charms


coach australia


Basketball shoes


true religion


michael kors outlet


burberry outlet


michael kors


ugg boots sale


hermes uk


kate spade outlet


ate spade handbags


abercrombie outlet


kate spade purses outlet


kate spade bags outlet


michael kors outlet


official michael kors


nike jordan shoes


Mizuno Shop


michael kors outlet bags


prada outlet


Kate Spade Australia


canada goose jacket


Cheap Ray Ban


mlb shop


china wholesale


nike australia


mk bags


nike outlet


kate spade black friday


ups tracking


cheap basketball shoes


michael kors outlet


michael kors outlet


Michael Kors Watches Outlet


yeezy shoes


B Derbyshire


KD 8 shoes


nfl shop


kate spade UK


Kobe X Shoes


prada tote bag


nike huarache shoes


longchamp sac


moncler clothing


yeezy boost 350


moncler jacket


michael kors outlet


kate spade outlet


coach bag


asics shoes


burberry outlet


prada bags on sale


prada purses


Nike Kobe 9


Coach Outlet


michael kors handbags


prada outlet


ray ban sunglasses


MCM Outlet


canada goose jacket


Michael Kors Outlet


jordan shoes


burberry outlets


michael kors handbags


michael kors outlet


longchamps


michael kors factory outlet


coach outlet


burberry online


michael kors handbags outlet


michael kors italy


adidas yeezy boost 350


nike shoes australia


coach factory outlet


michael kors outlet


ray ban wayfarer


asics kayano


ray-ban sunglasses


prada bags


ralph lauren australia


nike jordan


coach sunglasses


rayban aviator


Hyperdunk 2016


tiffany co


michael kors online


Coach Sunglasses Outlet


prada sunglasses


Prada Shopper Tote


michael kors bags


michael kors outlet


pandora uk


ray ban prescription sunglasses


michael kors bags


pandora ring


chanel


Bed and Breakfast in chesterfield


piumini moncler replica


michael kors australia


kate spade black friday


pandora charms


hermes uk


official prada site


michael kors bags


kate spade outlet


mk outlet


coach outlet


coach outlet online


michael kors black friday


nike com


michael kors purses


prada us


balenciaga us


pandora bracelet


beats headphones


Hermes Outlet


oakley outlet


coach


ugg boots


Yeezy 350


Ralph Lauren UK


ralph lauren uk


Ralph Lauren Polo


ralph lauren


pandora rings sale


abercrombie outlet


ray-ban sunglasses


ray ban sunglasses


ray-ban sunglasses


ugg boots uk


kate spade


Longchamp Bags


Burberry Outlet


air jordan retro


coach outlet online


burberry canada


burberry outlet


pandora charms sale


Pandora Charm


michael kors outlet


coach carter


michael kors outlet


Prada Factory Outlet


hermes purses


burberry purse


sheepskin boots for women


Jordan Retro Shoes


nike lebron shoes


chanel australia


michael kors outlet


coach outlet


mk handbags


michael kors outlet


Nike Jordans


coach bags


cheap moncler jacket


burberry us


michael kors


michael kors purses outlet


Lebron 13


bercrombie Nederland


michael kors outlet


pandora bracelets


oakley sunglasses


pandora.com


coach outlet online


nike jordan shoes


Nike Hyperdunk Shoes


Nike Lebron Shoes


michael kors outlet


pandora rings


Nike Free


pandora jewelry


yeezy boost 350 shoes


Burberry outlet online


michael kors tote


prada handbags


Mizuno Shoes


michael kors uk


abercrombie fitch


ugg boots


coach usa


nike shoes


air jordan shoes


Chanel Tote Bag 2015


Prada Outlet


Chanel Outlet


oakley sunglasses


abercrombie and fitch


brand sunglasses


abercrombie outlet us


moncler down jackets


coach outlet,coach factory


ugg boots outlet


polo online


Nike Jordan Shoes


change points uk


snow boots


Yeezy Boost 350


true religion uk


Mizuno Running Shoes


Nike KD 8


burberry


yeezy boost 350


flash sunglasses


landing gears


michael kors canada


michael kors outlet online


kate spade purses


pandora uk


coach factory outlet


pandora necklaces


pandora rings


burberry canada


Nike Air Max


prada bags


ugg slippers


coach bags


michael kors outlet


paul smith uk


Billat


abercrombie and fitch


uggs outlet


oakley sunglasses


burberry outlet


Kevin Durant Shoes


burberry scarfs


jordan retro shoes


pandora jewelry


burberry australia


ralph lauren shirts


nike free run


Michael Kors Watches


prada glasses


prada outlet


Hugo Boss Outlet


coach outlet online


Mizuno Shop Japan


ray ban eyeglasses


prada official site


coach outlet


Ralph Lauren


baseball jerseys


MIZUNO Shop US


nike shox shoes


nike basketball shoes


Oakley Holbrook sunglasses


abercrombie & fitch


kate spade


Mizuno Wave


nike id


pandora jewelry


pandora charms


abercrombie outlet


ugg boots uk


oakley australia


Official Ralph Lauren UK Online Store


michael kors outlet


balenciaga bag


air yeezy shoes


coach factory


michael kors outlet


coach purse


coach australia


timberland uk


michael kors outlet


nike store


Polo Ralph Lauren


abssice 360


salomon shoes


burberry scarf


burberry outlet


kate spade canada


kate spade outlet online


prada outlet online


Nike Air Jordan


beats by dre


sunglasses hut


Burberry online


cheap ray ban sunglasses


ray ban clubmaster


shoes online sale


canada goose sale online


Longchamp Outlet


burberry scarf


coach sunglasses for women


ugg australia


burberry outlet canada


Chanel bags Outlet


burberry outlet online


michael kors outlet


burberry australia


coach outlet online


coach factory outlet


michael kors jet set tote


true religion uk


pandora uk


lzm12.10
 


Post your comment
Your name:
 
E-mail Address(Not visible in comment):
 
 
Retype the number:
   
Your comment:
 




:8 :o? :) :P :/ :D :o :% :0/ :o| :? :o-
:DD :(( 8o :( 8D :N :Y :DDD 7| :luv: :\'( :(((

 
Feed of the Month
Wall Street Pit


Submit your own economic or stock news today!



Open Quark in InDesign








Site Owner: David
Location: Los Angeles
© 2006 - 2013 Help/FAQ | Privacy Policy | Terms & Conditions | About us | Contact | Your feed on this site?