UK economy: Cautious optimism as UK set to avoid another recession

THE UK economy has been buoyed by data that suggests the UK will avoid another recession.

The Organisation for Economic Co-operation and Development (OECD) revealed a positive shift in economic activity at the start of the year.

The OECD said its composite leading indicators, a survey designed to anticipate turning points in the economic cycle, had signified stronger but tentative signals of improvement.

The Paris-based organisation, which works to improve social and economic wellbeing across the world, said it had seen a positive change in momentum in all major countries with the global position driven by growth in the US and Japan.

The UK economy contracted by 0.2 per cent in the final three months of 2011 but industrial surveys have suggested a slight pick up in activity in January. The OECD survey will add to cautious optimism around the country’s growth prospects for 2012.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The OECD leading indicator had previously declined for 10 successive months, so the improving trend seen at the end of 2011 and start of 2012 boosts hopes that the UK can return to growth in the first quarter and avoid recession.”

Mr Archer said the survey gave support to his forecast for 0.3 per cent growth in the first three months of 2012. The official figures will be published next month.

Retail sales and purchasing managers surveys for manufacturing, services and construction have all been robust so far this year, while the Bank of England acknowledged the slight pick-up at the start of the year in its last quarterly report.

But Mr Archer said the economy still faces “serious domestic and international headwinds” including squeezed consumer purchasing power, rising unemployment and the threat posed by the eurozone crisis.