Government will be heaving a sigh of relief at today's GDP figures - ITEM Club - Ernst & Young - United Kingdom

Government will be heaving a sigh of relief at today's GDP figures - ITEM Club

Nida Ali, economic advisor to the Ernst & Young ITEM Club, comments on today's GDP figures:

• Growth of 0.5% will certainly have the government heaving a sigh of relief
• Healthy growth of 0.7% in services is particularly encouraging
• But the outlook has darkened considerably, and looking ahead, the economy is expected to slow considerably

“The government heaving a sigh of relief at today’s GDP figures. Although growth was expected to accelerate in Q3, primarily due to the one-off factors such as the extra bank holiday affecting the economy in Q2, it’s encouraging that the figures didn’t disappoint.

The breakdown by sector provides a crumb of comfort as well. With healthy growth of 0.7%, it is encouraging to see the services sector resume its traditional role in the UK economy. Indeed, with manufacturing now faltering, the economy is dependent on services to keep the recovery afloat.

However, adverse developments in the global economy, particularly an escalation of the debt crisis in the Eurozone, have weakened the outlook in the coming months. Business surveys are clearly pointing to a slowdown and today’s manufacturing PMI is further evidence of that. At best, we are looking at growth of about 0.9% in 2011 and 1.5% next year."