- 26 июля 2011, 23:17
City disappointed by falling manufacturing output and weak consumer demand, fuelling fears of return to recession
The City was braced for the UK economy to grow by little more than 1% this year after the latest figures for national output showed that Britain's deepest and longest postwar recession is being followed by the slowest recovery since the Great Depression of the 1930s.
Analysts predicted the Treasury would be forced to cut its growth estimate after gross domestic production data showed that activity increased by just 0.2% in the second quarter of 2011 – after flatlining in the previous six months.
Data from the Office for National Statistics (ONS) showed the level of activity still almost 4% below the peak in early 2008, with no sign of the rebalancing of growth towards manufacturing and exports predicted by the government.
Germany and the United States have already recouped the ground lost during the recession of 2008-09, but at the current rate of progress it will be 2013 at the earliest before the UK economy is back to where it was at its peak in the first quarter of 2008.
City analysts described the easing back of growth from the 0.5% recorded in the first quarter as disappointing, even though the ONS said one-off factors such as the royal wedding and the production shutdowns caused by the Japanese tsunami had probably knocked 0.5% off growth between April and June.
With Britain's main export market, Europe, affected by the sovereign debt crisis, the ONS estimated that output from Britain's factories fell in the second quarter of 2011 and remains almost 8% below its level of five years ago.
Overall industrial production – which includes output from the North Sea, mines and the electricity and gas industries as well as manufacturing – has suffered an even bigger fall during the recession and its aftermath, and is still more than 11% down on its 2006 level.
The economy's fastest growing sector since the slump has been business services and finance, which includes the City. The ONS figures showed the output of accountants, banks, lawyers and management consultants up by almost 5% since 2006, and by just over 3% since the banks began to recover from the financial crisis in the autumn of 2008.
Neil Prothero, analyst at the Economist Intelligence Unit, said: "The UK economy is continuing to splutter along in first gear. Despite historically low interest rates and a still-huge fiscal deficit of around 10% of GDP, the economy has barely grown at all since September last year.
"The official release tried to put a positive spin on things, estimating that the additional April bank holiday, the royal wedding and the after-effects of the Japanese tsunami had cut 0.5% from the quarterly GDP figure. While some downward impact is likely to have occurred, this seems an optimistic assessment, and there is no guarantee of a rebound effect in Q3.
"Forward-looking surveys continue to point to an economy handicapped by insipid demand at home and weakening demand abroad. We expect GDP growth of 1.1% in 2011, well below official forecasts, which implies a high probability of the government missing its deficit-reduction target."
Britain started to emerge from recession in the final few months of 2009 and in the second quarter of 2010, when the coalition government was formed, activity expanded by 1.1%, its fastest rate of growth for nine years. But the pace of growth slowed to 0.6% in the third quarter of 2010 before GDP contracted by 0.5% in the final three months, in part due to the blizzards that shut down large parts of the economy last December.
Richard Driver, analyst for Caxton FX, said 0.2% quarterly growth was "very poor indeed. With growth in the previous two quarters dead flat, the longer-term picture of the UK economy is pretty bleak. Manufacturing, industrial production and retail sales growth has slowed particularly badly in recent months, but in truth the situation is pretty dire across the board.
"Sentiment towards the UK economy is rightfully very negative," Driver said. "The financial markets value fiscal conservatism and deficit reduction, but fears that the UK economy will dip back into recession are mounting with every poor growth figure."
Businesses called on the Bank of England to restart its quantitative easing programme, which pumped £200bn into the economy in 2009 and 2010.
David Kern, chief economist at the British Chambers of Commerce, said: "To sustain demand, we think the Bank of England should persevere with low interest rates and consider an increase in the QE programme. We believe increasing the productive potential of the economy is more important to our economic success than simply boosting consumption. This means implementing growth-enhancing policies and removing regulatory burdens that hamper businesses in their efforts to create jobs and export."
Andrew Smith, chief economist at KPMG, said: "Output has been broadly flat for the last nine months and – despite the depressing special factors – there is little reason to think things have improved much since. The big picture is that domestic demand is being weighed down by government cutbacks and falling real wages, and exports and investment are still not strong enough to take up the slack."