Belfast Telegraph

Wednesday 3 September 2014

Slight economic boost after spending squeeze

Britain's dire economic performance at the end of last year was confirmed as official figures revealed household spending grew at the slowest rate in a year.

The Office for National Statistics (ONS) said spending on goods and services rose 0.2% between October and December – the lowest reading since the fourth quarter of 2011 – after slow growth in wages hit consumers.

But there was a chink of light in the economic gloom as the ONS said the economy expanded as a whole in 2012, up 0.2% against a previous estimate for zero growth.

Dr Esmond Birnie, PwC's chief NI economist, said the revision "probably" meant the economy here had shrunk by just 0.3% rather than 0.5% as previously thought. Nonetheless, the picture was "fairly bleak" for Northern Ireland in 2013.

"Across the UK in 2012 there was some evidence of recovery in consumer spending and in government and business investment, but imports significantly outweighed exports, impacting growth as our key eurozone markets weakened," Dr Birnie said.

"However, there was less evidence of a similar pattern in Northern Ireland, given rising regional unemployment, the absence of consumer confidence and a private sector lacking the critical mass to make up for public sector austerity.

"That means 2013 will be tough and recovery will rely on any possible accelerated public sector capital projects and on a concerted focus on exports from the local private sector."

The ONS raised its estimate for third quarter growth from 0.9% to 1%, although it still believes the economy contracted by 0.3% in the final quarter of the year.

It will offer little respite for Chancellor George Osborne ahead of the Budget, coming just days after the UK was stripped of its prized AAA rating by Moody's.

Wilfred Mitchell, policy chairman of the Federation of Small Businesses, said: "This latest revision to the full year GDP figure is good news for small businesses and the FSB believes yesterday's announcement indicates further tentative signs of greater optimism. Now we want the Government to use next month's Budget to keep up that momentum."

Markit chief economist Chris Williamson said recent surveys suggested the economy would "narrowly" avoid a triple-dip recession with 0.2% growth in the first quarter.

"However, none of the root causes of the weakness of the economy have yet been resolved, suggesting very modest growth at best can be expected over the course of 2013," he said.

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