UK growth figures reveal challenges
The challenges faced by the global economy were underlined today by mixed growth figures from both sides of the Atlantic.
The UK economy grew at an upwardly revised rate of 0.6% between July and September, but the estimate for gross domestic product (GDP) growth in the second quarter was slashed to 0% from 0.1%, the Office for National Statistics reported.
Meanwhile, the US economy grew more slowly in the third quarter than previously estimated but economists said the world’s largest economy is set to record a strong finish to the year.
Back in Britain, analysts warned the UK was still teetering on the brink of recession, despite the improved third quarter figures, which were revised up from a previous estimate of 0.5%, as indicators point towards a slowdown as the new year approaches.
The overall picture at home was broadly unchanged by the revised figures as the country still faces considerable headwinds in the new year, notably from the eurozone, the UK’s biggest trade partner, which is buckling under the pressure of a crippling debt crisis.
Chris Williamson, chief economist at financial services information company Markit, said: “The underlying trend is very clearly one of an economy that is struggling in the face of what seems to be an ever-growing list of headwinds.”
Manufacturing, services and trade surveys have been mixed so far in the final quarter of the year, prompting fears that the UK is heading for a double-dip recession.
The tax and spending watchdog, the Office for Budget Responsibility, recently slashed official forecasts for growth following a similar downbeat assessment of the economy from the Bank of England.
The powerhouse services sector, which makes up some 75% of the total economy, grew at 0.7% in the third quarter, up from a previous estimate of 0.6%.
Agriculture grew at 0.5% in the third quarter while construction was ahead 0.3%.
But industrial production growth was revised down once again to 0.2% from 0.4%, which partially offset improvements in the stronger sectors.
The squeeze on household spending was underlined by figures revealing real disposable income growth slowed to 0.3% in the third quarter from 1.3% the previous three months.
Government spending was also revised down to 0.2% from 0.9% – which corresponds more closely with Chancellor George Osborne’s programme of deficit-busting spending cuts.
Looking back to the second quarter, growth in the services sector was revised down to 0.1% from 0.2%.
Labour Treasury spokeswoman Rachel Reeves said: “These revised figures show an unchanged picture over the last year. The British economy has been flatlining over the last 12 months, when we need strong growth to get unemployment and the deficit down.”
There is some hope that the improved outlook for the US will help steer the global economy to safer ground, although America is also threatened by the potential fallout from a euro meltdown.
The US government now estimates that consumer spending grew at a 1.7% annual rate last summer, instead of 2.3%. The updated estimate reflects data showing less spending on hospitals.
The US third quarter figures were lower than estimated – but were still the best quarterly figures this year, following growth of 1.3% in the second quarter.
However, economists think the economy is growing at an annualised rate of more than 3% in the final three months of this year, which would be the fastest pace since a 3.8% performance in the spring of 2010.
The upturn in the economy comes as President Barack Obama faces a re-election vote in less than a year and a presidential campaign that will focus on the economy.
The President may face voters next year with the highest unemployment of a sitting president seeking election since World War Two.
