By Max Clarke
The UK’s GDP growth rate slowed again over the last quarter, dropping to a meagre 0.2%.
And while this figure had been anticipated, pundits have been quick to react- variously attributing the decline to external economic shocks and the Royal Wedding bank holiday weekend; or the Coalition Government’s rapid deficit reduction strategy.
Following is analysis from commentators about the the UK's anaemic recovery.
“It’s no secret that the second quarter has been a tough one for all industries,” said Jeremy Cook, Chief Economist at World First currency exchange, “and the slowdown in growth seen in the PMIs for the manufacturing and services industries forewarned us of this impending disappointment.”
Trades unions have again interpreted the figure as evidence that the government’s economic strategy is not working, though Cook refutes this:
“0.2% is second-rate growth, but growth all the same. However, this feeble figure will not be enough to satisfy those who believe that the government is currently on the wrong course and that a deficit reduction plan is causing unnecessary pain.”
Ian McCafferty, chief economic advisor to the CBI made a similar observation to Cook, noting the skewing effect of major events:
“This is the third consecutive quarter in which special factors, such as the winter weather, unseasonal North Sea maintenance, the Japanese tsunami and an extra bank holiday, have made interpretation of the data more difficult and have depressed economic activity over the short term.
“There is likely to be some bounce back over the autumn,” McCafferty proceeded to say, “but it’s clear that the underlying economic recovery remains fragile and difficult.”
“We’re not back in recession," said Graeme Leach, Chief Economist at the Institute of Directors, "but with numbers like these it might feel as though we are. Even though temporary factors may have reduced the quarterly growth rate that does not mean we can expect a bounce back in Q3. This is the L shaped recovery, in the wake of a financial crisis, the IoD has consistently forecast over the past 2 years."
“But let’s be quite clear," cautioned Leach, echoing Cook, "weak GDP growth does not mean that we should resort to Plan B with fiscal policy. Outside of the euro-zone debt crisis the biggest threat to the economy at present is monetary not fiscal policy. The overall money supply is flat at best and until it accelerates we can have no confidence in a sustained upturn. The likelihood of further quantitative easing has increased in the wake of today’s figures. Even with more QE we’re probably looking at just 1 per cent GDP growth this year.”
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