Britain probably escapes slump in Q3
LONDON: Britain probably escaped a recession in the third quarter as the economy grew the most in two years in a rebound after one-time disruptions, economists said.
Gross domestic product rose 0.6% from the previous three months, when an extra public holiday led to a 0.4% drop, according to the median of 33 estimates in a Bloomberg survey. The Office for National Statistics will publish the data on Thursday in London.
The surge masks underlying weakness in the economy that may still prompt more stimulus from the Bank of England (BOE). While policy makers are split on the need for more bond purchases when the current round ends next month, a number have said there is “considerable scope” to add to so-called quantitative easing.
“Even with some more positive signs of late, the economy remains weak, while large downside risks, particularly around the euro-area situation, persist,” said Nick Bate, an economist at Bank of America Merrill Lynch in London. “A majority of BOE members may still support at least some loosening in monetary policy.”
The Bank of England’s Monetary Policy Committee said in the minutes of its meeting this month that the outlook for the economy was worse than it had expected in August, and business surveys suggested “broadly flat output” for the rest of 2012. It will have new projections at its meeting next month.
Still, it also said that officials had “differences of view” on the need for more quantitative easing, with some of the nine Monetary Policy Committe members questioning its potential impact.
The National Institute of Economic and Social Research estimated on Oct 9 that the economy grew 0.8% in the third quarter. Stripping out distortions, it said the pace of expansion was closer to between 0.2% and 0.3%.
Estimates in the Bloomberg GDP survey ranged from no change to an increase of 0.8%.
Data this week gave a boost to the outlook, with inflation easing, unemployment falling and retail sales rising more than forecast. Consumerprice growth eased to 2.2% in September, the slowest in almost three years, while retail sales increased 0.6%.
The labour-market report showed that payrolls rose to a record in the quarter through August, pushing the unemployment rate down to 7.9% from 8.1%.
Philip Rush, an economist at Nomura International Plc in London said a “deluge of data this week brought a variety of pleasant surprises.”