Shamik Das rounds up the reaction to this morning’s growth figures.
Reaction to this morning’s growth figures, which saw the UK economy grow 0.5 per cent in the third quarter of 2011, will not have pleased George Osborne – and nor will the overnight news from Greece that they will hold a referendum on the eurozone bailout deal, plunging the markets into turmoil.
Shadow chancellor Ed Balls said the economy was still “flatlining” as a result of Osborne’s “failing policies”; he said:
“Today’s figures confirm that the British economy has been bumping along the bottom for the past twelve months – flatlining when we need strong growth to get unemployment and the deficit down.
“As the ONS has said today, growth of just 0.5 per cent over the past year since the chancellor’s spending review – compared to 1.6 per cent in the US – is a significant slowdown from the 2.6 per cent we saw in the previous twelve months when we were starting to recover from the global financial crash…
“Already, the stagnant growth and higher unemployment that George Osborne’s failing policies have delivered mean the government is set to borrow £46 billion more than they planned.
After today’s figures, the chancellor will now have to downgrade his growth forecasts for a fourth time later this month – and revise up again his borrowing forecasts.
“These are really worrying times for families and pensioners struggling to pay the bills, young people out of work in record numbers and businesses on the edge. The combination of sluggish growth, rising unemployment, falling confidence and the latest surveys indicating a contracting manufacturing sector and depressed business confidence mean this is no time for complacency from the government.”
While James Knightley, of ING Financial Markets, told the BBC:
“While the Q3 growth rate looks respectable, it is important to remember that this follows a Q2 figure depressed by having fewer working days because of the royal wedding and supply disruptions caused by the Japan earthquake/tsunami.
“So, for the economy to have only grown 0.5% in Q3 suggests the underlying picture remains weak.”
With IHS Global Insight economist Howard Archer adding:
“This performance overstates the underlying strength of the economy and this is likely to be as good as it gets for some time to come.”
“We should not be fooled by the superficial gloss that ministers will put on this paltry figure of 0.5 per cent. The British economy is still heading towards the rocks of a double-dip recession, unless George Osborne introduces a much-needed Plan B rescue package.
“People are losing their jobs and those that have them feel insecure, so they are not going out to spend in the high street – the promised boost in private sector jobs to soak up the job losses in the public sector is an illusion masquerading as a truth. It is clear that more demand needs to be injected into the economy urgently.
“The savage cuts to the public sector will hit the local economies in cities and towns across the UK and, as a result, will cause more economic pain to families and communities.”
Elsewhere, the Telegraph’s Jeremy Warner said the “looming catastrophe in the eurozone” had “overshadowed” the UK growth figures:
“Whatever comfort ministers were able to draw from better than expected third quarter GDP figures – up a better than expected 0.5pc – would have been completely snuffed out by the overnight news of a referendum in Greece; it might be good for democracy for Greeks to have their say on the austerity of the bailout programme, but it’s deemed to be extremely bad for the wider sovereign debt crisis.
“It seems that every time European policymakers announce a “comprehensive” agreement to get on top of the crisis, they slip further into the mire…
“It always was going to be a big ask – decent growth at a time of fierce fiscal consolidation – but to stand any chance of working, it required relatively prosperous trading partners. This now looks ever more unlikely. Tough times lie ahead.”
Finally, the Guardian’s Larry Elliott says a “closer look” at today’s data shows the UK economy “is headed downhill from here”:
“It is clear that the outlook for the economy has worsened appreciably over the past six weeks. The third quarter got off to a reasonably strong start but by the time it came to an end the financial markets were in turmoil as a result of Europe’s sovereign debt crisis.
“Two important sectors of the economy – finance and manufacturing – have already felt the effects of the eurozone’s life and death struggle: banks have found it harder and more expensive to obtain credit, while industry has seen export orders dry up.
“As a result, the most significant piece of economic data released today was not that for gross domestic product but the CIPS/Markit Purchasing Managers Index for manufacturing. This showed that activity in October dipped well below the cut-off point of 50 that separates expansion from contraction and was at its weakest since the spring of 2009, when the UK was deep in recession.
“Manufacturing now only accounts for just over 10% of the economy, so in itself the manufacturing PMI does not guarantee that the economy will contract in the fourth quarter, but with consumer spending squeezed by rising inflation and government spending restraint increasingly being felt, the chances of at least one quarter of negative activity are high.”
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• Ignore Osborne’s spin; a jobs recession is inevitable – Tony Dolphin, November 1st 2011
• Fast spending cuts push UK economy from fastest quarterly growth for a decade towards zero – Cormac Hollingsworth, November 1st 2011
• Unprecedented growth of 1.3 per cent needed for OBR to meet its projection – Will Straw, October 31st 2011
• For every extra £4 spending is cut, it only cuts borrowing an extra 75p – Cormac Hollingsworth, October 18th, 2011
• Cameron’s “failed experiment” leads to yet another economic downgrade – Alex Hern, October 17th 2011