UK GDP Grows, US Labour Market Condition Improves

Coming as a surprise to the markets, the UK GDP has managed to post a positive number in the first quarter of the current calendar year. The GDP numbers that were reported yesterday indicate that the UK economy grew by a modest 0.3% in the January 2013 to March 2013 quarter. The GDP growth rate in the previous quarter was -0.3% and hence the Q1 numbers at this time indicate that the world's seventh largest economy has avoided the triple dip recession.

The UK government has taken strong austerity measures to avoid the feat recorded by the euro zone area. As the economy reported a contraction in the Q4 of last year, the IMF has said that the UK must reduce the pace of its austerity measures. With the GDP numbers coming in the positive territory, the UK government has said that it will not stop the austerity measures to keep the economy out of the shadow of the debt crisis.

UK's debt to GDP ratio, excluding financial interventions, stands at 75% which is on the higher side. If the country slows down its pace of austerity measures then it may have to face more debt which will further increase its debt to GDP ratio. Two out of three prominent rating agencies – Moody's and Fitch has stripped UK off its AAA credit rating due to the weak economy as well as high debt.

In the meanwhile, USA, the world's largest economy has come up with a breather to the markets as it reported a sharp drop in the jobless claims. According to the initial estimates of the US Labor Department jobless claims decreased by 3,39,000, more than the forecast of 16,000 in the week ended April 20, 2013. The data indicates that the companies are expecting more demand and hence have increased the headcount. The recovery in the labour market is encouraging for the economy as this means that the quantitative easing that the Fed is carrying out is showing a positive action. The US saw an elevated level of unemployment as well as employers adding a few jobs in the economy. The April numbers, however, indicate that the economy may not be as weak as it was seen, giving a breather to the US government.

Elsewhere, the Euro area has again reported a weak set of data showing that it is far from recovery. The recent China data also has indicated weakness in the second largest economy in the world. Amid these disappointing macroeconomic data, the recent UK and US data may be seen positively by economists. Besides, UK is the first major economy that has reported GDP for the March 2013 quarter. The expectations will now rise from UK which will also publish the GDP numbers on Friday April 26, 2013.