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| UK 'great recession' almost over, says thinktank | UK 'great recession' almost over, says thinktank |
| (about 4 hours later) | |
| Britain is finally shaking itself free of the grip of the "great recession", a leading thinktank has claimed, as it said the economy was on the cusp of returning to its pre-crisis strength. | Britain is finally shaking itself free of the grip of the "great recession", a leading thinktank has claimed, as it said the economy was on the cusp of returning to its pre-crisis strength. |
| The National Institute of Economic and Social Research (NIESR) forecast benign inflation and falling unemployment, and said that the UK economy will regain its pre-recession peak in the next few months. | The National Institute of Economic and Social Research (NIESR) forecast benign inflation and falling unemployment, and said that the UK economy will regain its pre-recession peak in the next few months. |
| "It is quite important symbolically that the economy is, or will very shortly be, bigger than it was in 2008," its director, Jonathan Portes, told BBC radio. | "It is quite important symbolically that the economy is, or will very shortly be, bigger than it was in 2008," its director, Jonathan Portes, told BBC radio. |
| "But, as far as individuals are concerned, what really matters is how rich we are – per capita GDP – and that's well below the level of 2008 and won't get back to its previous level for a couple of years." | "But, as far as individuals are concerned, what really matters is how rich we are – per capita GDP – and that's well below the level of 2008 and won't get back to its previous level for a couple of years." |
| Its optimism about the near-term outlook was reinforced by official figures showing the manufacturing sector enjoyed a jump in production in recent months. | Its optimism about the near-term outlook was reinforced by official figures showing the manufacturing sector enjoyed a jump in production in recent months. |
| The Office for National Statistics said factory output rose 1.4% from January to March, up from 0.9% growth in the three months to February. That marked the best quarterly growth since the second quarter of 2010, but the sector still has much lost ground to make up after the financial crisis hit output. | |
| News that much of the manufacturing growth in March came from the pharmaceutical sector will pile the pressure on David Cameron's government to fight AstraZeneca's corner as the UK company faces an unwanted £63bn takeover attempt from US company Pfizer. | News that much of the manufacturing growth in March came from the pharmaceutical sector will pile the pressure on David Cameron's government to fight AstraZeneca's corner as the UK company faces an unwanted £63bn takeover attempt from US company Pfizer. |
| The ONS said output increased by 0.5% in March, with 0.3 percentage points of that coming from the manufacture of basic pharmaceutical products and pharmaceutical preparations. | The ONS said output increased by 0.5% in March, with 0.3 percentage points of that coming from the manufacture of basic pharmaceutical products and pharmaceutical preparations. |
| In a separate ONS release on construction, statisticians doubled their estimate of first quarter growth in the sector, helping to buoy optimism about the overall economy keeping up momentum. | In a separate ONS release on construction, statisticians doubled their estimate of first quarter growth in the sector, helping to buoy optimism about the overall economy keeping up momentum. |
| "The UK is heading for another strong quarter of growth and the recovery is broadening. Today's data were mixed but on balance still pointing to solid recovery," said Rob Wood, chief UK economist at German bank Berenberg. | "The UK is heading for another strong quarter of growth and the recovery is broadening. Today's data were mixed but on balance still pointing to solid recovery," said Rob Wood, chief UK economist at German bank Berenberg. |
| NIESR revised up its estimate for GDP growth for 2014 from 2.5% to 2.9%. It forecast that unemployment will average about 6.5% this year and inflation would stay close to the Bank of England's 2% target. | NIESR revised up its estimate for GDP growth for 2014 from 2.5% to 2.9%. It forecast that unemployment will average about 6.5% this year and inflation would stay close to the Bank of England's 2% target. |
| But the thinktank's report warned about the nature of the recovery and raised questions over whether it was being widely felt. | But the thinktank's report warned about the nature of the recovery and raised questions over whether it was being widely felt. |
| GDP per head is still below its previous peak and will not exceed that level before 2017. Similarly, NIESR forecast real wages will grow this year, as average pay rises finally exceed inflation. But it noted that wages in real terms are about 6% below their 2009 level, and: "We do not expect them to make up that lost ground until 2018 or so." | GDP per head is still below its previous peak and will not exceed that level before 2017. Similarly, NIESR forecast real wages will grow this year, as average pay rises finally exceed inflation. But it noted that wages in real terms are about 6% below their 2009 level, and: "We do not expect them to make up that lost ground until 2018 or so." |
| NIESR also echoed warnings from other economists about the UK's weak productivity, which has seen it lag far behind most other advanced economies in terms of output per hour worked. | NIESR also echoed warnings from other economists about the UK's weak productivity, which has seen it lag far behind most other advanced economies in terms of output per hour worked. |
| Robust growth in employment combined with economic weakness in recent years had seen productivity drop sharply, the thinktank said, underscoring the rapid rise in self-employment. | Robust growth in employment combined with economic weakness in recent years had seen productivity drop sharply, the thinktank said, underscoring the rapid rise in self-employment. |
| "Even the return of GDP growth, however, has not yet resulted in significant productivity increases. This matters in the short run, since without any improvement in productivity, robust economic growth will see spare capacity absorbed relatively quickly; it matters even more for the medium to long run since ultimately productivity is the main, if not the only, driver of real wages and overall prosperity," NIESR's economic outlook warns. | "Even the return of GDP growth, however, has not yet resulted in significant productivity increases. This matters in the short run, since without any improvement in productivity, robust economic growth will see spare capacity absorbed relatively quickly; it matters even more for the medium to long run since ultimately productivity is the main, if not the only, driver of real wages and overall prosperity," NIESR's economic outlook warns. |
| It was also guarded on the prospects for net trade to drive growth. NIESR predicts the UK's trade position will get worse before it gets better. It warns the country's return to higher growth ahead of many other economies may mean that demand for imports outstrips export growth in 2014 and 2015. | It was also guarded on the prospects for net trade to drive growth. NIESR predicts the UK's trade position will get worse before it gets better. It warns the country's return to higher growth ahead of many other economies may mean that demand for imports outstrips export growth in 2014 and 2015. |
| "It is only from 2016 that we expect a positive contribution from net trade to return, as the global economy, and in particular, the UK's major trading partners, continue to strengthen," the report says. | "It is only from 2016 that we expect a positive contribution from net trade to return, as the global economy, and in particular, the UK's major trading partners, continue to strengthen," the report says. |
| Official data released on Friday showed Britain's trade gap narrowed in March. The ONS estimated the deficit on trade in goods and services at £1.3bn in March, compared with a deficit of £1.7bn in February as exports of goods rose almost 5% on the month. | Official data released on Friday showed Britain's trade gap narrowed in March. The ONS estimated the deficit on trade in goods and services at £1.3bn in March, compared with a deficit of £1.7bn in February as exports of goods rose almost 5% on the month. |
| David Kern, chief economist at the British Chambers of Commerce, said: "It is good to see that the trade deficit narrowed in March, and that the initial estimate for February has been revised down. But monthly figures are erratic, and a look at the first quarter of 2014 as a whole shows that the trade deficit only narrowed marginally compared with the previous quarter. | David Kern, chief economist at the British Chambers of Commerce, said: "It is good to see that the trade deficit narrowed in March, and that the initial estimate for February has been revised down. But monthly figures are erratic, and a look at the first quarter of 2014 as a whole shows that the trade deficit only narrowed marginally compared with the previous quarter. |
| "So while there are signs of a small improvement in the UK's international trade performance over time, the pace of change is still painfully slow." | "So while there are signs of a small improvement in the UK's international trade performance over time, the pace of change is still painfully slow." |
| • The ONS had earlier said this was the biggest calendar-quarter rise in factory output since the third quarter of 1999, or almost 15 years. It subsequently corrected that to the biggest rise since the second quarter of 2010 |