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What a difference 1% makes!
News that the world’s eighth largest economy broke out of recession and grew by 1% during the third quarter of 2012 sent waves of reactions across different economic and social standings, giving a mix of positive and negative impressions highlighted by the media today.
Whilst British Prime Minister, David Cameron, admits a lot of work still has to be done to turn the UK economy around and break free from the clutches of the 2008 financial crash, he said the GDP figures “show we are on the right track, and our economy is healing.”
The PM made the statement following the release of the latest Gross Domestic Product of the UK economy for the third quarter of 2012 showing 1% increase, the highest growth rate since 2007 but the actual value is roughly the same as last year’s output during the same period.
The Olympic Effect
Economists cautioned the boost in GDP the government is highlighting is significantly prompted by the recently concluded London Olympics and Paralympic Games, which both happened during the third quarter.
The Office for National Statistics, which officially released the data, admitted the two events contributed to the growth, although it claims the boost was not overwhelming.
“The events were likely to have impacted on the economy in a number of ways,” ONS said, explaining that ticket sales, including those sold prior to the event (accounting principles dictate they are to be included in the said quarter), only contributed 0.2 percentage points.
Further, while ONS data states the service sector got the highest growth during the quarter, the agency dismissed employment and job creations during the month-long event had no direct impact based on the survey, as so do retail and the entertainment sectors.
“It is not possible to quantify the overall impact of the Olympics and indeed some of the activity may have displaced other activity,” ONS further explained, calling the event, along with the extra bank holiday, special factors.
Flatlining
Shadow Chancellor Ed Balls said, however, that the economy was simply “flatlining” and only going back to the same size it was a year ago.
Ed Balls further stated the figures show the underlying growth remains weak, as quoted by the BBC.
Analysts were saying the real growth rate was at 0.3 percentage points, scrapping the 0.2 percentage points the Olympics contributed and the 0.5 percentage points attributed to the extra bank holiday during the previous second quarter owing to the Queen’s Diamond Jubilee, which resulted in one (there’s the number again!) working day during the third quarter.
ADVFN Chief Executive, Clem Chambers, said the British economy can “look towards recovery and growth” whilst admitting “there will be bumps in the road” as the country is not isolated from what’s happening in the global scale.
On the London Stock Exchange, FTSE 100 Index showed only a small of 0.4% rise to 5,827.56 points by 1:15 PM GMT.
