News Column

Problems remain but the British economy is growing again

April 30, 2014


ANY discussion of the latest economic growth statistics must always be prefaced by a health warning. These are early estimates which are often revised, sometimes drastically. Citigroup calculates that between1999 and 2010, the year on year growth in British GDP was revised up by 0.5 per cent on average, more than in any other G7 countries. In any case, all of the UK's economic statistics are about to be torn up, going back a number of years, as the Office for National Statistics embraces new accounting standards.

So much for the caveats. The UK's first quarter growth numbers were remarkably positive: the economy grew by 0.8 per cent quarter on quarter and by 3.1 per cent year on year.

One couldn't really have hoped for much more, and the early breakdown suggests a broadly balanced recovery, with industrial production up 0.8 per cent, services by 0.9 per cent and construction by 0.3 per cent, still the only real area of weakness.

The officially reported level of UK GDP is now only 0.6 per cent lower than it was at the peak of the bubble, which means that the economy is on course to finally set a new record in the second quarter. It took far too long, but at least we are finally getting there. The non-oil and gas economic output is already larger than the pre-recession peak. Even better, productivity is growing again, with the total number of hours worked rising at a slower rate than output. Real-term pay rises are therefore likely to accelerate over the coming months, assuming that inflation remains contained for now.

The overall picture is far from perfect. Huge imbalances remain, including rocketing house prices and the distortions created by loose monetary policy. But yesterday's figures were a good step in the right direction.

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Source: City A.M. (UK)