Contraction of Q3 GDP is a disappointment to many recovery-focused UK investors

Since the equity-market lows in March of this year, the UK stock market has risen in anticipation of an improvement in the economic environment. Indeed, data on the economy has certainly improved, providing grounds for hope the worst of the recession might be over.

However, investors who are of the opinion the UK economy is embarking on the road to a sustained recovery have been disappointed recently by the unexpected 0.4% quarter-on-quarter contraction in the initial estimation of third-quarter GDP. We, however, were not overly surprised by this negative reading. The weakness of the data lends weight to our belief the path to a clear and unambiguous economic recovery is some way off and, despite the measures introduced by the Bank of England to help insulate the economy from the worst of the downturn, several risk factors continue to loom large. ...