UK recovery slowest in a century
The economy may have clawed its way out of recession, but growth is still virtually stagnant
Sunday 21 October 2012
The UK is still on course for its slowest recovery in a century despite official figures set to confirm the nation has pulled out of a double-dip recession this week, experts warned today.
Initial estimates for the three months to September, to be published on Thursday, are likely to show a 0.6 per cent expansion of the economy, marking the first growth since September last year and the strongest since the autumn of 2010.
But experts highlight that the Office for National Statistics figures for quarterly growth will be flattered by comparison with the April-June period, which had one less working day due to the extra bank holiday for the Diamond Jubilee celebrations.
The Bank of England estimates the additional holiday knocked around 0.5 per cent off the economy, while the ONS says Olympic ticket sales added an extra 0.1 per cent to growth in the latest quarter. After accounting for these one-off factors, experts warn the underlying economy is virtually stagnant.
Deutsche Bank's chief UK economist George Buckley said: "If you look at the recovery from previous recessions in the 1970s, 1980s and 1990s, by now GDP had regained the pre-recession peak. But in the UK we are still 4.1 per cent below peak output in 2008.
"This is slower even than the 1930s and we believe it could be until 2014 until we regain all the ground lost."
The UK's languishing performance puts it second only to struggling Italy in terms of lost output among the G7's major economies, according to Deutsche Bank. Even Japan – struck by a catastrophic tsunami in March last year – has made more progress towards making up lost ground, with output 1.9 per cent below its 2008 peak.
Economists also warned against triumphalism from politicians desperate to seize on any good news on the recovery this week.
Vicky Redwood, the chief UK economist at Capital Economics, said: "They would be a bit stupid to do so since unless we get a number above 0.6-0.7 per cent the economy is basically flat. It would take a number nearer 1 per cent to really get excited. Moreover we believe that there is a real risk that the economy could slip back into contraction in the final quarter of this year."
The Bank of England's monetary policy committee is also likely to weigh the numbers carefully as it faces a knife-edge decision over whether to expand its £375bn programme of quantitative easing in November.
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