Britain’s economy grew slower than expected in August, setting back its recovery from the coronavirus lockdown. Most of the growth was down to a one-off government restaurant subsidy programme, official data showed this morning. Growth in the accommodation and food sector, surged by 71.4%, boosted by the Eat Out to Help Out scheme to subsidise meals and easing lockdown restrictions. Gross domestic product rose by 2.1% from July, its slowest month-on-month increase since the economy began its recovery in May after a record slump. Sterling weakened against the US dollar and the euro after the data was released. The dominant services sector grew by 2.4% from July, a lot slower than expectations for growth of 5.0%. The Bank of England is widely expected to increase its bond-buying programme in November in its next move to pump more stimulus into the economy.
European Union lawmakers broke off talks with EU government representatives over the bloc’s budget and a 1.8 trillion euro coronavirus recovery package. A deal between the European Parliament and governments is required to adopt the EU’s largest-ever financial stimulus which EU leaders agreed at a July summit to help lift Europe’s economy from its deepest recession on record. Delays in reaching a deal could further damage the EU economy, as many sectors rely on the EU funds. Clashes between lawmakers and governments are common over EU budgets, but have so far always ended up in agreements.
The US dollar edged lower and was headed for a second consecutive week of losses as investors increased bets Joe Biden would win the US presidency. Several Wall Street banks forecast some kind of stimulus package after the elections, no matter which candidate wins. The risk-sensitive Australian dollar rose 0.2% to $0.7187, putting put it a fraction higher for the week despite a central bank statement signalling more monetary. The euro was up 0.1% to $1.1796. Sterling climbed to $1.2943 and has held firm this week as prospects for a Brexit deal appeared to improve.
The selection of a new director general of the World Trade Organisation is entering its final stage. The final two selected from an initial list of eight candidates are Nigeria's former finance minister Ngozi Okonjo-Iweala – also a US citizen, and South Korean trade minister Yoo Myung-hee. The new chief is expected to be decided in early November and will have to manage a conflict between some of the biggest economies in the world - including China and the US who are embroiled in bitter trade conflict. The US has so far undermined the WTO's ability to carry out one of its main functions - settling trade disputes between member countries.