British Economy Stuck in Recession
The British economy fell by 0.2% during this year’s 3rd quarter, according to official figures, which is better than the estimated 0.3% contraction, although some had hoped for only 0.1%. However, this means that the UK’s recession is not over yet, making Britain the only G20 country to remain in recession, which has been going on for 6 quarters now. Analysts think that figures for the 4th quarter will show strengthening in the economy.
Despite analysts predicting a positive growth for these next few months, recovery isn’t guaranteed yet, according to David Kern, BCC chief economist. The BCC also noted that these latest figures raise concerns about how strong the recovery will be.
The UK has essentially been in recession since about the 2nd quarter of last year, and it has contracted by 6% since then. When the initial 0.4% contraction was released in October, many analysts were surprised, as they had expected to see some growth during that time. Philip Shaw with Investec said that they find it hard to believe that the economy was contracting from July to September. However, UBS’s Amit Kara says that they expected the figure to be revised to positive growth, and they see a 1.8% growth for next year.
Some recovery in the economy came from a boost from construction output due to the growth of public sector projects. Stephanie Flanders, BBC economics editor, also said that households saved an 8.7% ratio of income during the 3rd quarter, rather than the 7.6% in the previous quarter. This is important for the economy to improve, she added.
Analysts say that high household debt levels have to come down in order for the economy to be more balanced. However, there has to be a happy median, as overspending contributes to the downturn, while cutting back too much on spending will do the same. This is why ‘thrifty shoppers’ have been partially blamed for the contraction during the quarter, as they aren’t spending enough in attempt to balance out their finances again.