Green shoots set to be shortlived

By SCOTT REID
Published on 21/10/2012 00:00

FIGURES this week are ­expected to show that Britain edged out of recession during the summer though the ­celebrations are likely to be shortlived.

An initial reading of third-quarter gross domestic product (GDP) is tipped to show the UK economy officially ­exiting recession after three quarters of contraction.

Analysts believe Thursday’s official data will reveal a headline quarter-on-quarter growth rate as high as 0.7 per cent. That follows confirmation that the economy shrank by 0.4 per cent between April and June.

The third quarter is likely to have been boosted by an extra working day and improved consumer spending as well as a modest lift from the staging of the Olympic and Paralympic games.

However, economists point to a weak underlying picture with a softening in construction, manufacturing and services activity in September.

Howard Archer, chief UK economist at IHS Global ­Insight, the forecasting group, said he expected GDP growth of about 0.7 per cent in the third quarter, but acknowledged there was “major ­uncertainty over this”.

He added: “We see GDP contracting by 0.2 per cent overall in 2012 as growth in the second half is insufficient to offset the contraction suffered in the first half. The UK still has a very tough job in developing significant sustainable growth given tighter fiscal policy, ongoing problems in the Eurozone and generally soft global growth.”