Economy data provides little seasonal cheer as autumn rebound falls short of expectations
Friday 21 December 2012
Pre-Christmas cheer from the beleaguered UK economy was in short supply today after more disappointing data on growth and the public finances.
The releases from the Office for National Statistics (ONS) showed that the autumn rebound in the economy was not quite as strong as forecast at 0.9 per cent, while it emerged the Government borrowed more than expected in November.
There are fears the UK will slump back into recession for the third time early next year, although a better-than-expected performance from the services sector offered a glimmer of hope for Chancellor George Osborne today.
ONS figures showed that the services sector had grown 0.1 per cent between September and October.
But Scott Corfe, senior economist at the Centre for Economics and Business Research, said the economic outlook remained highly fragile and a triple-dip recession could not be ruled out.
He said: "We expect economic growth of less than 1 per cent next year, which means that the Chancellor's deficit reduction plans could come off the rails."
Economists had predicted a fall in public sector net borrowing, but excluding financial interventions such as bank bailouts, it was £17.5 billion in November, up £1.2 billion on the same month last year.
The worse-than-expected public finance picture will put further pressure on Britain's gold-plated AAA status, with all of the three main ratings agencies now with the country on negative outlook.
The further signs of the weakness of the UK economy will fuel speculation that the Bank of England will decide to carry out more asset purchases - also known as printing money - next year.
It held off from boosting its £375 billion quantitative easing (QE) this month, after inflation rose to 2.7% in October and November.
In the Chancellor's Autumn Statement earlier this month, the Office for Budget Responsibility (OBR) said it expected borrowing to be £108 billion in 2012/13, lower than its £119.9 billion March estimate.
Public finances will be swelled by assets from the QE programme, which will be transferred to the Treasury, and the Government is also expecting the auction of bandwidth for 4G mobile broadband services to provide a boost.
A Treasury spokeswoman said: "Today's various data underline what the Chancellor said to Parliament at the Autumn Statement: that it's taking time, but the British economy is healing. The deficit is down by a quarter since 2010, and more than a million private sector jobs have been created."
The Office for Budget Responsibility said it remained "highly uncertain" the Government would meet its public sector borrowing target.
It said there would need to be higher tax receipts and weaker spending growth to meet the forecast, but that tax receipts were highly dependent on the performance of the economy over the remainder of the year.
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