Official estimates published in the middle of October 2013 show that a summer growth surge in the UK has led to the fastest progress in the country's economy in over three years. Economists predict that the Office for National Statistics’ first growth estimate between July and September 2013 will reveal a 0.8 per cent improvement in the economy. This would signify the best economic developments since the coalition gained power in the second quarter of 2010.
Official estimates published in the middle of October 2013 show that a summer growth surge in the UK has led to the fastest progress in the country's economy in over three years. Economists predict that the Office for National Statistics’ first growth estimate between July and September 2013 will reveal a 0.8 per cent improvement in the economy. This would signify the best economic developments since the coalition gained power in the second quarter of 2010.
This improvement offers a fresh boost for Chancellor George Osborne, following a few months of good economic news as consumer confidence was sustained by steadily increasing house prices, a heatwave and a series of “feel good” one-offs. These included the birth of Prince George and Andy Murray’s win at Wimbledon.
The dominant services sector in the UK is likely to have contributed the larger part of the economic growth, with some help coming from the manufacturing and construction industries.
However, experts still point out that the British economy’s recovery continues to be at the slowest rate in a century. Even if the nation has come up with a 0.8 per cent growth in the latest quarter, this would still put the economy at 2.5 per cent below its highest pre-recession rate in 2008. This just might be the worst performance among the G7 leading economies with the exemption of Italy, which still remains at over 9 per cent below its peak.
Martin Beck, UK economist at leading research firm Capital Economics, commented on this subject, saying: “People look at the growth rates but they don’t look at the starting point.”
Several doubts remain regarding the sustainability of the economic recovery in the midst of concerns over the government’s Help to Buy scheme for artificially fuelling the housing market and over a renewal in consumer credit holding back attempts to rebalance the economy towards more savings and exports.
Meanwhile, employment rates have hit a record high of almost 30 million. However, this is overshadowed by the annual wage growth’s fall to 0.8 per cent from the official inflation of 2.7 per cent in September of this year.
George Buckley, chief UK economist at the Deutsche Bank, said: “The big question is how sustainable this all is and whether we are at what the Bank of England Governor Mark Carney would term ‘escape velocity’. We’ve got low interest rates, quantitative easing, Help to Buy and Funding for Lending – policy settings are still a long way from being normal.”
Buckley continued on to ask what will happen if the government will stop providing such schemes. He suggested there is a lot of risks including a potential re-emergence of the eurozone crisis, as well as the US debt ceiling issues which have only been postponed until February.
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