Improvement expected for economy

12 April 2012

The UK's economic health returns to the spotlight with the second estimate of official output figures for the third quarter of the year.

Economists predict the shock 0.4% fall in output seen between July and September will improve slightly to a 0.3% decline - although this still represents a record sixth successive period of recession for the economy.

The initial gross domestic product (GDP) data stunned experts, who had expected the UK to pull out of its slump after survey evidence signalled a return to growth in services and manufacturing.

Official data published since the first estimate of output a month ago has been mixed, with retail sales revised upwards, while industrial production was weaker than first thought.

Investec economist David Page said although he is sceptical of the scale of the initial GDP fall, he thinks it is unlikely the revision will be dramatic. He said there was "no strong lead from the data", but evidence from around the edges "does suggest we are seeing firmer growth".

Recent figures for the powerhouse service and manufacturing sectors has indicated an improvement. Unemployment is also rising at its slowest rate since early 2008 - reaching 2.46 million between July and September - although international forecasters have warned the jobless rate, currently at 7.8%, could hit 9.5% in two years even after the economy begins to recover.

The UK is predicted to climb out of recession in the final quarter of the year, having lagged behind other developed nations that began their recoveries earlier in the year. France, Germany, Japan and the US have all already enjoyed an upturn in output, putting pressure on the UK Government.

Meanwhile, union leaders have pressed the Government to continue taking measures to help the economy out of recession, even if it leads to a bigger deficit.

The TUC told the Chancellor the economy was still "very precarious" and could face a double-dip recession if premature attempts were made to tackle the deficit. Once recovery has been established, taxes for the better-off should be raised, the union organisation said in its submission ahead of next month's Pre-Budget Report.

There was no need for a crisis response to the deficit, said TUC general secretary Brendan Barber. He added: "Cutting spending now or in an emergency budget would be disastrous. When business and consumers stop spending, the state must make up the difference."

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