In the fourth quarter of 2013, the UK economy registered its fastest pace of growth since the 2007 meltdown, according to just released official data, reports Team IFM.
London, January 29: In the fourth quarter of 2013, the United Kingdom posted its fastest growth since the 2007 global meltdown, figures released by the Office for National Statistics on Tuesday said.
The growth was mainly driven by the agriculture, utilities, services and manufacturing sectors while extraction and construction posted a decline.
ONS figures show the volume of output in the three months to January grew at the fastest pace quarter-on-quarter since the meltdown – by 0.7 per cent – bringing the annual growth rate to 1.9 per cent.
The 2013 annual growth is miles ahead of 0.3 per cent notched in 2012, but well below the pre-meltdown average growth of 2.5 per cent and even lower than the 3.4 per cent witnessed on the eve of the economic implosion.
ONS also estimated the 2013 fourth quarter growth to be 1.3 per cent below the peak in the first quarter of 2008. “From peak to trough in 2009, the economy shrank by 7.2 per cent,” ONS said.
Good Cheer:
Earlier on Tuesday, a forecast report released by a leading business lobbying organisation made an identical prediction. The Confederation of British Industry’s latest monthly Growth Indicator showed the economy was gathering momentum and was expected to continue to strengthen.
“This is good news, and we’re seeing improvement across many different sectors,” said CBI Director-General John Cridland in a statement. “Our new Growth Indicator echoes this building confidence, showing that output in the last three months grew at the fastest pace since late 2007, with strong performances in business and professional services, and manufacturing,” Cridland said.
“This is a strong platform for an even better year in 2014.”
Similar views were expressed earlier by the International Monetary Fund in its World Economic Outlook Update for January, titled “Is the Tide Rising?”
The euro area is turning the corner from recession to recovery, IMF said even as it warned that the recovery would be uneven and modest.
“Elsewhere in Europe,” its report said, “activity in the United Kingdom has been buoyed by easier credit conditions and increased confidence. Growth is expected to average 2.25 per cent in 2014-15, but economic slack will remain high.”
Professional services group EY – formerly Ernst and Young – was also upbeat. Its Real Estate Indicator 2014 report released earlier this month said the UK was seen as the “most attractive market” for investment in real estate when compared with other European countries.
“Transaction activity in the UK is also set to be on the rise, with 87 per cent of respondents forecasting a considerable increase in 2014,” the EY report said. “More than eight out of 10 investors surveyed believe that capital markets are expected to be even more attractive for real estate IPOs and equity capital increases than last year.”
Rishi Bhuchar, a partner in EY’s real estate corporate finance team, said the results of this year’s trend indicator show that, more than ever, stability and security play a big role in influencing investment decisions.
“It is because of those two factors that the UK market continues to enjoy the vote of confidence by investors,” Bhuchar said.
Royal Bank of Scotland also struck an optimistic note. In a statement on Monday, RBS noted jobs were up even though pay was under pressure. “The labour market continued its good run with unemployment falling to 7.1 per cent in the three months to November,” it said.
It also pointed to an allied development that reflected the current buoyant mood over the economy – job vacancies were up 4 per cent quarter-on-quarter and 15.2 per cent year-on-year.
RBS found the latest Bank of England Agents’ Survey of Business Conditions report “a feel-good page turner,” with profits, sales, employment intentions and credit availability witnessing an upward curve.
Guarded Caution:
The bank, however, noted that firms preferred to increase employment to meet rising demand rather than invest. “Wage growth remained muted. Average weekly earnings increased by 0.9 year-on-year, well behind inflation.”
In a separate statement to Mail Online news portal, RBS economist Ross Walker said, “To date, the recovery has been somewhat unbalanced, led by consumption, so we remain sceptical about the sustainability over the medium-term.”
Other analysts too warned of a bumpy road ahead and economists said the recovery process was brittle, with wavering consumer confidence posing a threat to positive momentum.
Research from EY shows that FTSE 350 group – representing the top listed companies in the UK – warned profits would be noticeably lower than expected in the three months to the end of December – the same number as in the fourth quarter of 2008.
EY admitted that the 255 profit warnings in 2013 were less than the 287 the previous year, which could bolster expectations of a recovering economy. But what was worrying was the sudden spike in warnings in the fourth quarter.
“The 30 per cent rise in UK profit warnings in the final quarter seems incongruous next to improving economic data,” Mail Online quoted Keith McGregor of EY as saying.