GDP doom and gloom, is now a good time to export? Of course it is …
Head Trader, Smart Currency
Post date: Wednesday, 2nd May 2012
It's indicative of the sobering times we are living in that news of the UK slipping back into recession was greeted with a general air of apathy by many. Gross Domestic Product (GDP) in the UK fell by 0.2% in the first quarter of 2012 over the previous quarter. How big a deal is this and what are the implications for sterling?
Looking at UK GDP growth figures for the past few years, they don’t make for pretty reading. Since mid-2008 the UK has had seven quarters of GDP growth – compared with nine quarters of GDP contraction. Hence news that we are now - technically - in recession again merely confirms the general weakness of the domestic economy.
This perhaps explains why market reaction to the latest GDP figures was fairly muted. Indeed, in the same week as these figures were released, sterling hit a 20-month high of 1.2275 against the euro and a six-month high of 1.6205 against the US dollar. Sterling, then, remains strong; the obvious reason for this is that the Eurozone and the US have problems of their own.
Will this continue to be the case? Not long ago, our analysts in the City gave us three-month expectations for sterling against the Euro of 1.23, moving to 1.25 on a 12-month scale; and, correspondingly, 1.55 and 1.52 against the USD. Those figures for the euro may still hold good while the figures for the USD might need revising given sterling’s positive movement against the USD in recent weeks. Only time will tell.
Is now a good time to export? In my opinion, the short – and obvious – answer to this is that there’s never a bad time to be exporting. Question - what do the following countries have in common: China, Qatar, India, Iraq, Estonia, Turkey, Saudi Arabia, Indonesia, Hong Kong and Singapore? The answer is that these are just a few of the 70-plus countries whose GDP growth rate exceeded 5% in 2011. Out of interest, I randomly researched two of these countries - Qatar and Saudi Arabia – and found that both offer fantastic contract opportunities in their respective sectors.
My overriding point here is that it’s very easy to get caught up with the doom and gloom engulfing the UK economy and, in the process, lose sight of the fact that many parts of the world are developing fast. Moreover, as the list above shows, high economic growth is not limited exclusively to the much-talked about BRICS.
But what about exchange rates? I’ve spoken to many exporters down the years who’ve started exporting at a time when sterling is relatively strong against other currencies. This, they’ve told me, stands them in great stead for if sterling eventually weakens. Like I said above, there’s never a bad time to start doing business abroad. The only question is, what are you waiting for - there’s a whole world out there waiting for you.
So to ensure you’re getting the best information on these currencies get a risk strategy in place and Smart Currency Exchange can help you do this in one phone call. So call us now on 020 7898 0500 or visit our bespoke site at www.smartcurrencybusiness.com/businesssco.