UK economy struggles back to growth
The British economy nudged out of recession in the three months to the end of September, the Office for National Statistics said on Thursday.
Gross domestic product (GDP) grew by 1% after the Olympic Games offered a boost to the economy, which had been floundering in a double-dip recession.
Vicky Redwood, chief UK economist at Capital Economics, was upbeat about the news, saying the growth was ahead of the firm's expectations and adding: "Admittedly, much of this reflected temporary factors. But even accounting for this suggests that underlying output managed to rise by a small amount - an improvement on recent quarters.
"As for the policy implications, the figures could tip the balance towards the [Bank of England's] Monetary Policy Committee holding fire at the upcoming meeting (although even if it pauses in November, we still expect more asset purchases at some point)."
Jason Conibear, trading director at forex specialist Cambridge Mercantile, sounded a more cautionary note: "We've emerged from the double dip but nobody is denying that we've had the wind behind us. It's hard to quantify but the real figure, minus the Olympic boost and other one-off factors, is likely to be roughly half this.
"With the global economy as finely balanced as it is, there's every chance we could see more contraction during 2013."
According to Azad Zangana, European economist at Schroders, it's difficult to judge whether the better-than-expected numbers will continue into the fourth quarter of 2012. "More recently, business surveys like the survey of manufacturers conducted by the Confederation for British Industry showed weakening activity heading into the fourth quarter. In addition, rising domestic energy prices and food price inflation is likely to renew the squeeze on household incomes. This is likely to hurt retailers in the run-up to the crucial festive shopping period," he commented.
Zangana added that the uncertainty about the implications of the US "fiscal cliff" after the presidential elections in November make it hard to make forecasts over the health of the UK economy.
This article was written for our sister website, Interactive Investor.
Monetary Policy Committee
A committee designated by the Bank of England to regulate interest rates for the UK. The MPC attempts to keep the economy stable, and maintain the inflation target set by the government and aims to set rates with a view to keeping inflation at a certain level, and avoiding deflation. The MPC meets on the first Thursday of each month and discusses a variety of economics issues and constitutes nine members: the governor, the two deputy governors, the Bank’s chief economist, the executive director for markets and four external members appointed directly by the Chancellor.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).
Posh-sounding word for the FOReign EXchange market – the global market for trading currencies. The primary purpose of Forex is to assist international trade and investment by allowing businesses to convert one currency to another. The Forex market is one of the biggest markets in the world, and includes banks, central banks, institutional investors, currency speculators, corporations, governments, other financial institutions, and retail investors.