Martin Flanagan: Reasons to be less than cheerful

New data out yesterday shows the UK economy grew less than previously thought for much of this year. Picture: Getty

New data out yesterday shows the UK economy grew less than previously thought for much of this year. Picture: Getty

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AS if it was needed, the Bank of England has even more reason to sit on its hands on any interest rates rise.

New data out yesterday shows the UK economy grew less than previously thought for much of this year, with the figures revised down for both the second and third quarters.

Even before these downward revisions, UK inflation remained well under control despite the rise in real wages giving consumers the most disposable income since 2010.

Few economists believed any interest rate rise would come until well into 2016, possibly not until 2017. That view will be strengthened by the Office for National Statistics revealing that growth was 0.4 per cent in the three months to end-September rather than the initial estimate of 0.5 per cent.

The revision is even sharper for the second quarter of the year to end-June, with growth down to 0.5 per cent from the 0.7 per cent previously estimated.

The obvious inference is that Britain may be doing better than many economies, certainly in the European Union, but just not quite so good as we had come to think. The brief fall in the pound on forex markets yesterday said it all. Traders decided that the prospect of an interest rate rise from the Bank was perhaps even more distant than they had thought.

With each batch of economic data, such as last week’s poor construction figures, there looks increasingly tenuous read-across from the Federal Reserve’s first hike in US rates last week since the financial crash. Quite simply, the US, while sharing some characteristics with the UK recovery, is further along the curve and has greater access to growth industries such as technology.

Yesterday’s update on the true magnitude of the UK’s economic growth is not a douche of cold water. But it is a lowkey reality check.

• We’ve had Gordon Brown taking an advisory role at asset management giant Pimco this month. Alistair Darling, who served as Brown’s Chancellor, has become a director of American investment bank Morgan Stanley. And Tony Blair Associates has a roadmap to seemingly limitless business and political connections.

Other ministers of all stripes join the boards of companies they once effectively regulated.

It all seems so seamless when the transition happens that one wonders whether the heads of these major business and financial organisations ever idly think about such appointments years before they are made.

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