Economists React: Still ‘Significant Concerns’ About U.K. Growth
The U.K. economy expanded a revised 0.3% in the fourth quarter, reporting stronger progression than originally estimated. The numbers confirm the U.K. economy exited recession in late 2009, and suggest it did so with more momentum than first thought. Below, economists react.
The upward revision to GDP was higher than expected, but the detail of the data gives rise to significant concerns. The upward revisions stemmed in large part from much stronger retail sector output, presumably reflecting buys having been brought forward yet to be of the VAT hike [at the start of 2010]- so strength here is likely to wane. – Ross Walker, RBS European Economics
This upwards revision is an encouraging sign that the economy has been on the rise stronger, and for longer, than the official data suggest. The details of Q4 demand weren’t particularly robust, though. All of the increase in GDP could be clarified by the pace of destocking moderating in Q4 – inventories added 0.5 percentage points to the quarterly progression rate. Final demand, consequently, was still negative. But, that’s not unusual at this stage of the cycle. – Neville Hill, Credit Suisse European Economics
[T]he upward revision will only modestly dilute fears that the economy could suffer relapses over the coming months as it deals with January’s terrible weather, the VAT hike, an ending to the car scrappage scheme in March and Quantitative Easing being halted. Faltering progression in Europe is also a concern for export prospects…. To be sure, the significant weather-related hit to a still very fragile [U.K.] economy at the start of 2010 means that there is a very real danger that the economy could suffer renewed ellipsis in the first quarter. – Howard Archer, IHS Global Insight