By Max Clarke
The Office for National Statistics this morning confirmed the estimated 0.2% GDP growth rate for the second quarter 2011.
“These figures were broadly as expected,” commented David Kern, Chief Economist at the British Chambers of Commerce.
“While special factors, such as the Royal Wedding, partly account for the weak growth, the overall pace of expansion in the economy is disappointing. The decline in manufacturing in the quarter is a concern, with an initial estimate of 0.3 percent, which has been revised to a larger decline of 0.5 percent.”
David Kern proceeded to compare the ailing UK economy with slow growth across developed states, arguing that decline is in part due to external shocks. The government, said Kern, should maintain its focus on balancing the deficit and not bow to political pressure and increase expenditure.
“There are difficult times ahead for the UK economy but there is no need for undue pessimism. Economic growth remains in positive territory and other nations face the same challenges. For example, Germany grew by only 0.1 percent in the second quarter while the French economy was stagnant. “
“Based on these figures, we believe that the government must persevere with its deficit-cutting plan aimed at stabilising our public finances. But we mustn’t be complacent and every effort must be made to avoid an economic setback. The Bank of England should maintain low interest rates for an extended period and consider increasing the QE [Quantitative Easing] programme if there are further signs of weakness.
Dr. Kern’s comments about quantitative easing mirror those voiced by Bank of England Governor Mervyn King and more recently of notorious Monetary Policy Committee hawk Martin Weale. Both have advocated the controversial asset purchase programme in light of long-term rock bottom interest rates being unable to stimulate more meaningful recovery.
“On its part, the government should explore more policies to help boost growth, such as reducing regulatory burdens which prevent businesses from creating jobs and wealth,” concluded Kern.
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