UK set to avoid triple-dip slump by hair’s breadth

Ben Southwood
Follow Ben
THE UK will narrowly dodge its third recession in five years, with GDP growth in the first quarter of 2013 just edging into positive territory, a think-tank forecasted yesterday.

This chimed with analyst judgements that a shock jump in industrial production in February, on figures out yesterday, quashed worries the UK would suffer a triple-dip.

The economy expanded 0.1 per cent in the first three months of this year, according to the National Institute of Economic and Social Research’s estimate, a turnaround after the 0.3 per cent fall in GDP seen in the closing months of last year.

This would stop the UK from entering a third technical recession – defined as two consecutive quarters of negative output growth – since the financial crisis.

Better-than-expected industrial production figures also gave a lift to sagging analyst sentiment.

After January’s 1.3 per cent fall, total output in the production industries grew one per cent in February, according to the Office for National Statistics (ONS), against market estimates it would grow only two fifths of one per cent.

And the manufacturing sector boosted its output 0.8 per cent between January and February.

“Yesterday’s estimates of industrial output help to reassure us that the amount of manufacturing drag is likely to be fairly limited, or even avoided, further raising confidence in our view that a triple-dip recession will be avoided,” said Investec’s Philip Shaw.

But City economists were worried that a widening in the trade gap could act as a drag on growth in the period.

The UK deficit grew from £2.5bn in January to £3.6bn in February, as exports fell 1.1 per cent but imports rose 1.7 per cent.

Exports going outside the EU crashed particularly hard, by 4.7 per cent, the ONS said, including a £329m fall in sales to the US. By contrast exports headed to other EU members rose by 0.6 per cent.

And rate-setter Paul Fisher said the government needed to buy more assets to give the recovery some oomph. Though the Bank of England and Treasury’s funding for lending scheme was helping to get the economy back on its feet, the economy still needs more monetary support, Fisher said. But he predicted an economic recovery was on its way this year.