Doubts grow over QE end

David Hellier
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THE lower than expected economic growth figure may delay the ending of Quantitative Easing (QE), according to Citi economist Michael Saunders.

“Before these data, we judged that there was little chance that QE would be extended at next week’s MPC meeting.

“These data introduce considerable uncertainty, but on balance we still believe that the MPC will probably decide to stop QE at the upcoming meeting, but the decision is no longer clear cut,” Saunders adds.

The CBI said yesterday’s figures showed how fragile the economic recovery is.

Ian McCafferty, CBI Chief Economic Adviser, said: “While the data marks the end of the longest recession in living memory, the slightly disappointing rise of only 0.1 per cent demonstrates how fragile the recovery is. There are some signs of life for the UK consumer and manufacturing exports, but otherwise private sector activity remains very sluggish.

“Even if the estimate is revised upwards in coming months, this rate of growth is lacklustre, and for many it will not feel like recovery for some time yet.”

Financials were out of favour because of the GDP news and were still impacted by last week’s proposals from US President Barack Obama to curb banks’ risk-taking ability.

Lloyds Banking Group, Royal Bank of Scotland, and HSBC shed 0.2 to 2.3 per cent. Inter-dealer broker ICAP was the top FTSE 100 faller, down 3.8 per cent.

Founder, Bettercapital
“The outlook is probably quite cheerful until the election or the sovereign debt problem explodes, whichever is the first. After the election, we’re bound to have spending cuts and it’s hard to see the economy growing other than quite feebly.”

Author of Wigley Report into London’s future
“With the banking system still highly leveraged and with significant write-offs yet to be taken, the prospect of significant growth in bank lending to the corporate sector anytime soon will be low. This will, in my judgement, be a major constraint to GDP growth.”

Chief economist, Goldman Sachs
“Well, at last we are officially out of recession. Virtually every reliable indicator we follow, including employment, is improving. So as long as monetary or fiscal policy is not tightened too much, 2010 will be much better than 2009."