GDP grows steadily yet may stall in 2011

 
Julian Harris
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RESILIENT economic growth continues to be recorded in the UK, according to official figures released yesterday.

The economy grew by 0.8 per cent in the three months to September, the Office for National Statistics (ONS) confirmed.

And GDP was up 2.8 per cent compared to 12 months earlier. The figures mark a calendar year of consecutive growth in the UK.

Further good news came in the details, which “look more sustainable than in prior quarters” according to Andrew Goodwin, senior economist at the Ernst & Young ITEM Club.

“There is greater balance and this gives the impression of durability, and much smaller reliance on stockbuilding,” he added.

There was also less reliance on construction growth, which fell to four per cent, down from the unusually high second quarter rate of 9.5 per cent.

GDP was boosted by a surprise improvement in net trade as exports grew faster than imports.

However, there remain concerns for the economy’s prospects in the final quarter of the year, and into 2011.

Growth in consumer spending remains weak, falling to 0.3 per cent. Falling incomes, government spending cuts and the impending rise in VAT will pinch consumers, say analysts.

Combined with tight credit conditions and potential knock-on effects of the crisis in Ireland, GDP “looks set to slow further in the fourth quarter, possibly down to around 0.4 per cent” according to Chris Williamson, chief economist at Markit.

Most analysts expect per quarter growth between 0.3 per cent and 0.5 per cent for next year.
The economy is in a robust state, but there is no room for complacency, said David Kern, chief economist at the British Chambers of Commerce (BCC).

“The government must focus all its efforts on enabling the private sector to make 2011 a year for growth,” he said. “Obstacles that hamper businesses in their efforts to create jobs, invest and export must be removed.”

The ONS will report on fourth quarter growth on 25 January next year.