Factories deal blow to recovery hopes of ailing British economy
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UPDATED:
21:01 GMT, 5 April 2012
Hopes that the ailing British economy staged a solid recovery early this year were rocked yesterday by a double-whammy of disappointing news.
Official figures showed factory output tumbled 1 per cent in February alone – far worse than expected in the City and the biggest drop since April last year.
The National Institute of Economic and Social Research (NIESR) then estimated growth of just 0.1 per cent in the first quarter of the year – meaning Britain has avoided recession, but only just.
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Recovery: Bank warns the British economy will ‘zig zag’ in and out of growth
It dampened hopes of a much stronger
bounce after a hat-trick of upbeat news earlier in the week suggested
the economy grew by 0.5 per cent in the first three months of 2012.
With the outlook for the year so
uncertain, the Bank of England held interest rates at 0.5 per cent and
quantitative easing – its money printing programme – at 325bn.
George Buckley, chief UK economist at
Deutsche Bank, said ‘decent’ economic growth in the first quarter will
be ‘difficult to achieve’ given the weak manufacturing numbers.
Industrial production – which includes mining and quarrying – increased 0.4 per cent in February.
‘It has been very choppy,’ said
Buckley. ‘This is exactly the sort of thing you would expect to see in a
more muted recovery like the one we are experiencing.’
The economy shrank by 0.3 per cent in
the final quarter of 2011 – leaving Britain on the brink of the first
double-dip since 1975.
The Organisation for Economic
Cooperation and Development last week predicted that output would fall
0.1 per cent in the first quarter of 2012 – meaning the UK was back in
recession.
But a hat-trick of upbeat surveys on
the manufacturing, construction and services sectors this week led to a
flurry of predictions that the economy grew by as much as 0.5 per cent
between New Year and the end of March.
NIESR was far less optimistic in its
latest verdict and warned that although the UK ‘has avoided a technical
recession’ the economy remains ‘weak’.
The Office for National Statistics
will publish the official figures later this month. Simon Kirby, an
economist at NIESR, said the recovery will not take hold until 2013 and
warned that the economy will remain ‘depressed’ until 2014 when output
will finally reach its pre-recession peak –leaving Britain in the grip
of the longest slump for 100 years.
The Bank of England cut interest rates
to 0.5 per cent in March 2009 in a desperate bid to prevent recession
turning into depression.
It has since embarked on a 325bn
money printing programme. Governor Sir Mervyn King has warned that the
economy will ‘zig zag’ in and out of growth throughout 2012.
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