Fastest advance for UK economy in more than three years fuelled by summer growth spurt
Official estimates published this week will show that a summer growth spurt has fuelled the fastest advance for the UK economy in more than three years.
Economists predict the Office for National Statistics’ first estimate of growth between July and September will show a 0.8 per cent uplift in the economy. This would represent the best improvement since the second quarter of 2010, when the coalition gained power.
The advance offers a fresh fillip for Chancellor George Osborne following a summer of improved economic news as consumer confidence was buoyed by rising house prices, a heatwave and a succession of “feelgood” one-offs. These included the Royal birth and Andy Murray’s Wimbledon win.
The UK’s dominant services sector is likely to have contributed the lion’s share of growth, with help also coming from the manufacturing and the construction industries.
However, experts point out that the UK’s recovery remains the slowest in a century. Even if the country has managed growth of 0.8 per cent in the latest quarter, this would still leave the economy languishing 2.5 per cent below its pre-recession peak in 2008. This would be the worst performance among the G7 leading economies with the exception of Italy, which remains more than 9 per cent below its peak.
“People look at the growth rates but they don’t look at the starting point,” said Marrtin Beck, Capital Economics’ UK economist.
Doubts remain about the sustainability of the recovery amid concerns over the Government’s Help to Buy initiative for artificially stimulating the housing market, and over a revival in consumer credit hindering efforts to rebalance the economy towards exports and savings.
Employment has hit a record high close to 30 million, but annual wage growth has also reached a new low of 0.8 per cent, trailing far behind official inflation of 2.7 per cent in September.
Deutsche Bank’s chief UK economist, George Buckley, 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.
“What happens if we stop providing this? There are also 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.”