New GDP figures show Britain’s economic growth has nearly flatlined and manufacturing production has contracted compared with the last quarter.
Today’s disappointing GDP figures were largely expected and indeed they were better than some had feared.
Figures released today by the Office for National Statistics show that growth in the British economy has declined from 0.5% in Q1 of 2011 to 0.2% in Q2. Production made a poor showing in comparison to service industries, shrinking by 1.4% on last quarter while services grew by 0.5%. Manufacturing was still securely above mining and quarrying however which fell 6.6%.
These result have been greeted with some understandably uninspiring commentary, confirming as it does the beliefs of most analyst that unplanned disruptions earlier in the year, such as the Japanese tsunami and bad winter weather, were yet to take their full toll.
Add to the mix the impact of the Royal Wedding bank holiday and continued sluggishness in consumer spending and is understandable that usually vocal commentators for business like CBI and EEF could not find their usual eloquence.
Chief economic adviser for the CBI, Ian McCafferty, commented: “This is the third consecutive quarter in which special factors such as the winter weather, unseasonal North Sea maintenance, the Japanese tsunami and an extra bank holiday, have made interpretation of the data more difficult and have depressed economic activity over the short term. There is likely to be some bounce back over the autumn, but it’s clear that the underlying economic recovery remains fragile and difficult.”
Ms Lee Hopley, chief economist at EEF, was equally anodyne – if a little more insightful into the specifics for manufacturing.““The mediocre expansion in the second quarter was largely anticipated with temporary factors weighing heavily on business in April. But after a tough start activity in manufacturing and services looks to have gained ground in May and June.
“We now need to look through these statistical quirks to get a clearer picture of the path of recovery,” she said before adding, “However, concerns remain about the resilience of our economy to potential further headwinds in the second half of the year. But for now, government needs to maintain its focus on its supply side reforms to ensure the recovery beds down.”
The Chancellor George Osborne has certainly expressed his intention to do this. Despite criticism from the shadow Chancellor Ed Balls he has stated today that the demonstrated growth in the economy, however small, indicated stability and that this should inspire confidence, both at home and abroad. Mr Osborne commented:”The positive news is that the British economy is continuing to grow and is creating jobs.” He continued, “it is positive news too that at a time of real international instability we are a safe haven in the storm.”
Mr Osborne has refused to be stirred on topics such as VAT and has said he is confident the government is following the right path for sustained, long term recovery. This is in spite of accusations that the Coalition has become focused on recovering the deficit rather than supporting growth.
Mr Osborne’s assurance has been backed up by the Prime Minister David Cameron who says: “Unlike previous governments, there’s one team at the heart of this government – that is the chancellor and the prime minister, working together to make sure we do everything possible to get our economy growing.”