FEARS of a technical recession have eased as a couple of upbeat business surveys suggest that the UK economy grew in the opening three months of the year.
The British Chambers of Commerce (BCC) announced this morning that they expect GDP expansion of 0.3 per cent in the first quarter of 2012, reversing the knock-back to the economy at the end of last year.
Official estimates suspect that GDP shrank by 0.3 per cent from October to December.
But the BCC’s latest economic survey of thousands of companies shows promising new growth at UK factories, while separate figures released yesterday back up the findings.
A purchasing managers’ index (PMI) compiled by Markit rose to a 10 month high for the manufacturing sector, measuring 52.1 in March. All readings above 50 indicate economic expansion.
“Another encouraging set of results,” said economist Andrew Goodwin of Ernst & Young’s Item Club, “which makes it almost certain that the economy will have returned to growth in the first quarter”.
Yet non-manufacturing sectors in the UK are failing to perform as well as factories.
Results from Britain’s largest sector – services – lagged behind manufacturing in the BCC’s survey.
“Growth is likely to remain low for some time,” warned BCC economist David Kern, “and a return to a more normal pace is unlikely until 2013.”
Kern expects total GDP expansion of just 0.6 per cent for 2012 as a whole.
Both the BCC and the Markit surveys also revealed stubborn price pressures. “Our current forecast is that the fall in UK inflation over the next 12-18 months will be slower than first expected,” the BCC said.
And Barclays Capital commented: “The [Markit PMI] survey reported prices increasing across a range of commodity inputs, but oil and metals prices were reported to be the main drivers.”