US recession is finally over – as British economy left floundering
PRESSURE mounted on Gordon Brown after the United States came out of recession yesterday, leaving the UK as the only major world economy experiencing negative growth.
As Britain remained locked in the longest recession since records began, the US economy grew for the first time in a year, bringing an end to the worst downturn America has endured since the Great Depression.
US gross domestic product (GDP) grew by 3.5 per cent in the third quarter from July to September, a turnaround from the previous three months when the economy shrank by 0.7 per cent.
The news resulted in stocks rising in Europe and on Wall Street, and led to analysts predicting the world economy was entering an encouraging yet fragile recovery.
The improvement was welcomed by President Barack Obama, who said it was "an affirmation that this recession is abating and the steps we've taken have made a difference".
On this side of the Atlantic, however, the figures led to opposition politicians claiming that Britain was being left behind by the US. Shadow chancellor George Osborne said: "These figures are very good news for the world economy, but Britain now stands out as the only major economy still in recession.
"Gordon Brown's claim that we were 'best placed' now lies in tatters. His recession plan has failed. The rest of the world is moving on and we are left behind."
Mr Osborne added: "On the same day as yet more disappointing business-lending data, it is increasingly clear that we need credit and confidence to get the British economy moving again. We won't get either without new economic leadership."
Earlier this month, it had been forecast that the British economy, the sixth largest in the world, would come out of recession – which is defined as two consecutive quarters of negative economic growth.
But the most recent figures dashed those hopes when it was announced that GDP had fallen by 0.4 per cent, meaning that the economy had contracted for a sixth successive quarter, making Britain's recession the longest since records began 50 years ago.
The French and German economies had already emerged from recession by the time the British figures had been published.
The return to growth in the US was seized on by Obama supporters as proof that the president's stimulus package has been central to turning the economy around.
Josh Bivens, an economist at the Economic Policy Institute, noted that in the six months prior to the passing of the American Recovery and Reinvestment Act – as the package is formally known – the economy was shrinking at a rate of 5.9 per cent but in the half-year since its introduction, there had been growth of 1.4 per cent.
Mr Bivens said: "It's far too early to declare 'mission accomplished', but it is crystal clear that the Recovery Act was crucial in pulling the economy out of its tailspin."
The recovery saw gains in consumer spending, exports and home construction.
Experts said it was also driven by government programmes such as discounts on new cars and an $8,000 tax credit for first-time home buyers.
Markets worldwide responded positively to the US data. Britain's FTSE 100 rose 1.1 per cent to 5,137.72, France's CAC 40 jumped 1.4 per cent to 3,714.02 and Germany's DAX closed up 1.7 per cent on 5,587.45.
In New York, the Dow Jones industrial average index surged 2.05 per cent to 9,962 and the Standard & Poor's 500 index added 2.25 per cent to 1,066.
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Sunday 26 May 2013
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