Finance News

GDP Growth Stays at 1 Percent

Despite fears that the UK’s GDP would drop below 1% in the revision by the Office for National Statistics today, it has been revealed that the original figure wasn’t overly optimistic, as some had feared, but was actually spot on.

There is the possibility of a further revision in future, but this latest statement means that the 1% growth for the third quarter of 2012 is unlikely to be changed. It’s great news for the government and means that 2012 might not see a shrink in GDP overall. However, they still have a tough fight ahead of them when it comes to public borrowing, with the number of mortgages and loans, considered a key part of economic stimulus, still falling below targets.

One of the biggest contributors to the increase was the sale of Olympic tickets, which were all counted in the third quarter regardless of when they were actually sold.

This has been criticised by some as giving an unrealistic view of the economy, showing an overly large drop in the first two quarters of the year and the final quarter of 2011 whilst giving the third quarter a much bigger boost than it actually received.

The good news has triggered the pessimists though, with key economic figures warning that the rest of 2012 and the entirety of 2013 still represent economic unknowns: “While the third-quarter GDP growth was encouraging and welcome news, the UK is by no means out of the economic woods and further relapses remain a very real possibility,” says Howard Archer, the chief UK and European economist for financial advisors IHS Global Insight, “Indeed, it is looking increasingly questionable whether the economy will grow in the fourth quarter.”

The Christmas period is usually a good one for traders, but the last few years have shown people being unusually thrifty over the festive period, particularly in 2011, which saw the UK enter its double-dip recession. If there is negative growth in the fourth quarter followed by negative growth in the first quarter of 2013, the UK will have entered a triple-dip recession, dangerous ground for any government to tread.