Belfast Telegraph

Friday 31 October 2014

Contrasting views cast doubt over recovery

Manufacturing growth looks set to help the economy avoid a triple-dip recession
Manufacturing growth looks set to help the economy avoid a triple-dip recession

The UK services and manufacturing sectors are on the rise and will help the economy avoid a triple dip recession, according to a new report by the British Chambers of Commerce.

The quarterly findings from the poll, which questioned more than 7,000 firms, said that the services sector, which accounts for about three-quarters of the UK economy, saw strong domestic sales and exports in the first three months of 2013. Overall, the organisation said that the results support its assessment that the economy will record "subdued growth" in 2013.

The results are in contrast to the picture of the economy being painted by official figures and other reports.

The Office for National Statistics (ONS) will give preliminary estimates of GDP growth for the first quarter later this month.

Its figures show the economy shrank by 0.3% in the last three months of 2012.

Meanwhile, the latest Markit/CIPS purchasing managers' index (PMI) has said that the UK's manufacturing sector contracted in the first quarter – if the UK economy does contract in the first three months of the year, it will have fallen back into recession for the third time in five years. The British Chambers of Commerce director general John Longworth said that fears of another recession may be tempered by the results. "The survey reinforces our assessment that recent ONS GDP figures have exaggerated the weakness and the volatility in UK output," he said

"Our survey results show areas of growing strength in the UK economy that militate against unnecessary pessimism, even though the UK's growth rate is still falling short of its potential.

"The Q1 results confirm that the economy's performance is weak by long-term historical standards and suggests a slow and protracted upturn. However, while remaining below trend for some time, growth is likely to stay in positive territory. Our survey shows that British businesses remain resilient, and are willing and able to drive recovery.

"The strength of the export balances, particularly in the service sector, confirms the existence of huge untapped potential that must be unleashed.

"We need a two-pronged strategy that combines firm adherence to cutting unsustainable levels of government current spending, with effective policies aimed at enabling the private sector to drive recovery and create jobs."

The Northern Ireland Chamber of Commerce publishes its own quarterly report using findings from firms in the region.

...but troubled manufacturing figures heighten fears of triple dip

By Holly Williams

The threat of a triple-dip recession has reared its head again after figures suggested the UK's manufacturing sector contracted in the first quarter following another month of sliding output.

The sector's "winter of discontent" continued into March as overall activity slumped for the second month in a row, with a worse-than-expected headline reading of 48.3 – below the 50 level which separates growth from contraction, the latest Markit/CIPS purchasing managers' index (PMI) revealed.

While this was up marginally on the 47.9 recorded in February, it left the overall reading at 49 for the first three months of 2013 after further falls in production and new orders.

Economists said the poor performance from manufacturers could be enough to tip the UK back into recession if the larger services sector also struggled to grow in the first quarter.

New export orders fell for the 15th month running in March, dashing hopes for a boost from the weakened pound.

The survey indicated that demand remained weak from Europe, while competition from the US and South Asia also hit the UK's export market.

The Markit/CIPS report showed little respite for manufacturers and in fact suggested that the weak pound had pushed up prices for imported raw materials and semi-finished products.

The recent bad weather was also cited as a factor behind recent falls in activity, as well as subdued client confidence.

Hopes are pinned on the services sector to help offset woes in manufacturing and construction to bring the UK back from the brink of recession in the first quarter.

The Office for National Statistics said service sector output increased by 0.8% in January on a year earlier and was up 0.3% month-on-month, despite the snow impact at the start of the year. Further details on the service sector are due in a PMI report later this week, while a survey is also out on March construction activity tomorrow.

Dismal PMI readings for March could see the Bank of England take further action to boost the economy at this week's rates meeting.

While policymakers are expected to keep the quantitative easing programme on hold at £375bn, they have already said they stand ready to pump more money into the economy if needed.

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