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Economy Figures Set To Show ‘Positive Growth’

Economy Figures Set To Show ‘Positive Growth’

Data is due to show the economy grew by around 0.5% over April, May and June – but analysts say the recovery is still fragile.

Economists are predicting good news when the first estimate of economic growth during April, May and June is revealed next week.

Analysts expect the Office for National Statistics to say that the economy grew by around 0.5% when it reveals its preliminary estimate for Q2 GDP on Thursday.

They point to several important economic indicators which have been positive in recent months.

Consumer confidence was at a 25-month high in June. Business confidence in Q2 was at its highest since 2007.

Retail sales volumes rose by 0.9% between Q1 and Q2. New car sales were 13.4% higher in June compared with the same month last year.

Former government economic adviser Vicky Pryce told Sky News: “I think what’s going on right now is that the consumer is very keen on spending.

“The consumer has reduced his savings ratio very substantially from about 7% a year ago to about 4% now so they are spending their way out of this recession.

“It’s not because they’re earning an awful lot more, because of course average earnings have not really moved very much and there are all sorts of restrictions in terms of public sector wages, so they are suffering a little bit from that. But they are feeling a lot more confident so they’re out there spending.”

Even the International Monetary Fund, which recently encouraged the Government to ease public spending cuts, has revised upwards its forecast for UK economic growth in 2013 from 0.7% to 0.9%.

However, some of the economy’s biggest problems remain with more Government cutbacks still on the horizon, banks still reluctant to lend and consumer prices rising at a faster rate than average wages.

Howard Archer, chief UK & European economist at IHS Global Insight, said: “There are still significant headwinds to growth which suggest that the upside for growth will be limited for some time to come and that the economy will likely remain prone to periodic losses of momentum.

“While we are encouraged by the recent extended and diverse good news on the UK economy, we currently remain cautious in markedly raising our GDP growth forecasts – especially given the many false dawns that there have been in recent times and the fact that events in the eurozone still pose a significant threat.”

There is also mounting evidence of a resurgence in the property market with house prices rising in June and mortgage approvals at a 41 month high in May.

However critics of the Government’s homebuying incentives such as Help To Buy have warned that it risks fuelling a property bubble.

Brunel University professor Moorad Choudhry told Sky News: “I’d like to ask why is the Government subsidising house purchases? That is something we got out of years back when we unwound tax relief on mortgages’ interest.

“If I inject cheap money into the stock market and it rises, that’s not genuine growth. It’s conceptually similar to subsidising anything and it’s a false growth.”

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Bank Of England Says UK Economy Set To Shrink

Bank Of England Says UK Economy Set To Shrink

  • Posted: Nov 14, 2012
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Britain’s weak economy may shrink in the last three months of the year and growth will remain sluggish into 2013, the governor of the Bank of England warned Wednesday.

The central bank in the UK warning came after the country’s gross domestic product on annual basis unexpectedly grew by 1 percent in the third quarter, ending a nine-month recession.

“Welcome as that is, it is not a reliable guide to the future,” Governor Mervyn King said at a news conference while introducing the Bank’s quarterly Inflation Report.

“Output growth is likely to fall back sharply in Q4 as the boost from the Olympics in the summer is reversed – indeed output may shrink a little this quarter.,” King said.

The bank also lowered its Global domestic product growth forecast for 2013 to about 1 percent.

“We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while,” the governor added.

King said the Bank “has not lost faith” in quantitative easing, the economic stimulus program of asset purchases which has pumped 375 billion pounds ($595 billion) into the British economy since 2009.

But there was a growth spurt in the third quarter  and the persistence of inflation above the official 2 percent target led the Bank’s Monetary Policy Committee to decide against any increase in Quantitative easing this month.

The Office for National Statistics said Wednesday that that the U.K. unemployment rate fell to 7.8 percent in the July-September period, down from 8.0 percent in the previous three months and from 8.2 percent in the year-earlier period.

There was in increase of 10,000 in the number of people claiming unemployment benefits in the month of September. Martin Beck, an analyst at Capital Economics, says that may signal that the job market is starting to weaken again.

“The labor market’s recent resilience may finally be starting to fade,” Beck said.

Meanwhile the statistics agency said that pay growth of 1.8 percent in the last year continued to lag behind the rate of inflation, currently 2.7 percent.

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