Britain seen exiting slump but still weak

AFTER months of lingering in recession, the UK is expected to have finally exited recession in the last three months of 2009, according to official figures due out tomorrow.

But while the country may be rejoicing that the longest and deepest post-war recession is over, economists warned that the preliminary estimate would still be subject to revisions and we could see the pace of growth slow as 2010 progresses.

The preliminary data only looks at the output side of the economy so it is based on estimates of industrial production and service sector activity. Both of these justify expectations for growth of around 0.4 per cent in the fourth quarter.

More timely surveys such as the purchasing managers’ indices and the CBI surveys indicate a return to buoyant growth – and have been pointing towards expansion for some time.

But we will not get the full picture until 26 February when estimates of the expenditure side of the economy – including consumer spending, net trade and inventories – will be published.

Friday’s weaker-than-expected December retail sales will have caused concern that GDP growth may not be as assured as had been previously hoped.

Capital Economics’ Vicky Redwood said: “If the economy came out of recession at the end of last year, it does not appear to have been due to the retail sector.”

Official GDP estimates have been significantly revised in previous quarters due to the uncertainty of the economic situation – the last time a first estimate of GDP was left subsequently unrevised was the first quarter of 2007.

Going forward, the prime concern for economists is whether the UK can maintain this pace of growth as fiscal and monetary tightening start to be implemented.