Economic growth (GDP)

Eurozone third-quarter growth slows. Analysts: the recovery is faltering. French GDP unexpectedly contracted by 0.1% in Q3. Germany growth slows – GDP up by 0.3%. Japan’s GDP expands less in Q3. UK retail sales unexpectedly drop by 0.7% m/m…

 


Powered by Guardian.co.ukThis article titled “Eurozone grows by just 0.1% as French economy shrinks – live” was written by Graeme Wearden, for theguardian.com on Thursday 14th November 2013 13.39 UTC

Here’s Dublin correspondent Henry McDonald on the news that Ireland won’t ask for a safety net when its bailout programme ends next month:

Ireland to exit EU-IMF bailout without precautionary line of credit

Updated

Some relief for French president Francois Hollande — France’s football clubs have suspended a strike planned for the end of this month to protest at his 75% super-tax on salaries above €1,000,000. AFP has more details.

Summary

On the eurozone GDP figures, my colleague Phillip Inman writes:

The eurozone’s economic woes persisted in the third quarter as Italy’s longest recession continued and a contraction in French output dragged growth down to 0.1%.

In the summer, hopes of a strong recovery were boosted by a second quarter rise in GDP of 0.3%, but the momentum in the first half of the year appears to have fizzled out.

Here’s the full story: Eurozone economic recovery falters in third quarter

Alessandro Leipold, chief economist at the Lisbon Council think tank, challenges the suggestion that Ireland is making a ‘clean’ break with its bailout by deciding not to take a credit line.

He reckon’s it’s a risky decision.

Enda Kenny’s decision not to ask for a credit line will have one intriguing consequence — Ireland won’t able to sign up for the European Central Bank’s OMT programme (in which the ECB would buy a country’s bonds to drive down its borrowing costs).

Ryan McGrath, a Dublin-based bond dealer with Cantor Fitzgerald, told Reuters:

Not taking a credit line is a statement of confidence by the government. It bolsters the sense that Ireland is detaching itself from the peripheral countries

“I don’t think the government is being rash. The big question is what are the implications for OMT access.

Back to the eurozone’s (scrappy) growth figures, and our economics editor Larry Elliott highlights the weak performance from the two biggest players in the single currency:

Europe’s fledgling recovery did not stall in the third quarter of 2013 but it was a close run thing.

Mainly due to a weaker performance by the Big Two – Germany and France – the growth rate in the euro area slipped back from 0.3% to 0.1%.

Few in the financial markets expect the 17-nation single currency zone to enter a triple-dip recession, but nor is anybody predicting anything other than a prolonged period of sub-par activity in which unemployment remains at one in eight of the workforce and deflationary pressures intensify.

And that, Larry concludes, means that the eurozone’s ‘lost decade’ will drag on.

Here’s his full analysis: Germany and France hold back eurozone’s fledgling recovery

fastFT have published more quotes from Irish prime minister Enda Kenny, outlining the decision to make a clean break from its financial assistance programme without the protection of a credit line:

We will exit the bailout in a strong position

The government has been preparing for return to normal market funding for three years….

There are still demanding times ahead. It does not mean any windfall of cash. It does not mean our economic challenges are over.

Ireland to exit bailout without precautionary credit line

Irish prime minister Enda Kenny has confirmed that his government will exit its bailout programme without the protection of a precautionary credit line.

It’s quite a moment. Kenny is addressed the Irish parliament now, declaring that:

This is the right decision for Ireland.

It means that Ireland will make a clean exit from its €85bn financial assistance programme, which ends on 15th December.

It has hit the targets set by its troika of lenders, and Kenny’s government must be confident that it can walk alone.

A precautionary credit line could have been sought from the European bailout mechanism. It would have given Dublin a guaranteed source of funding if it couldn’t borrow at affordable rates in the wholesale money market in future.

The full statement is online here.

Here’s the Irish government’s reasoning for going it alone: 

  • The market and sovereign conditions are favourable towards Ireland with the country returning to the markets in 2012, holding over €20 billion in cash reserves at year end which we can use to ensure that we can meet our maturing commitments and funding costs till early 2015 and Irish sovereign bond yields at historically low levels;
  • The public finances are under control in Ireland comfortably in line with EDP targets. Ireland is targeting a deficit of 4.8% in 2014 which is within the 5.1% EDP target and will deliver a primary balance or small surplus. The Government is committed to reducing the deficit to less than 3% in 2015 and putting the debt ratio on a downward path.
  • The two pack, the six pack and the stability treaty, the introduction of the ESM, and the major efforts by the ECB to do whatever it takes to safeguard the currency, further support our efforts to make a sustainable and durable return to the markets.
  • Domestic and international economic conditions are improving, monetary policy decisions are conducive to exit and confidence and sentiment towards Ireland has improved considerably in recent months.

Meanwhile in Ireland, the government has been meeting to discuss the process of exiting its bailout programme.

An announcement is expected very soon – with rumours flying that the cabinet will decide that it will not take a ‘precautionary credit line’ (which would have acted as a safety net in case Dublin struggled to borrow in the financial money markets).

Markit: eurozone economy still 3% below pre-crisis peak

Here’s another sobering fact — the Italian economy is more than 9% smaller than before the crisis began.

And Germany is the only one of the Big Four eurozone members to have clawed back all its lost growth (although France isn’t far away).

That’s via Chris Williamson of Markit, the data provider, who comments:

In terms of GDP levels, the Eurozone economy is still 3.0% smaller than its pre-crisis peak.

Of the largest member states, only Germany has exceeded its prior peak, with GDP up 2.6%. The French economy remains 0.3% smaller, while Spain and Italy are also 7.4% and 9.1% smaller respectively.

By comparison, the UK economy is still 2.5% smaller than its pre-crisis peak while the US is 5.3% larger. Japan has edged 0.1% up on its prior peak.

Euro GDP: more details

Romania posted the strongest growth across the European Union in the last quarter, with a 1.6% jump in GDP.

Cyprus suffered the biggest quarterly decline, shrinking by 0.8% (with the proviso that we only have annual data for Greece, where the economy is 3% smaller than a year ago).

The biggest reversal was suffered by the Czech Republic, contracting by 0.5% after growth of 0.6% in Q2.

Here’s the full table (sorry if it’s a bit small, the original is here):

Here’s a handy graph showing how the economic performance of major countries has diverged since the financial crisis struck in 2008.

Updated

Nancy Curtin, chief investment officer of Close Brothers Asset Management, takes an optimistic view.

The worst of the economic crisis is over, she argues, despite today’s disappointing growth figures:

Growth may have slowed but the Eurozone is finding its feet. It has taken a considerably longer time than the likes of the US but we are seeing signs of economic improvement. Let’s not forget the journey the 17 country bloc has made since the financial crisis, given that we haven’t seen the dreaded defaults in countries like Greece and Spain materialise.

However, there is still a long way to go. Unemployment continues to be a fly in the ointment and the recovery won’t pick up the pace overnight. More needs to be done to support the labour market from the bottom up. For months we have been calling for an extension to bank lending to SMEs across the Eurozone who are desperate for finance, and are the engine room of the Eurozone’s economy. As things stand, we expect the ECB to continue to boost liquidity through another LTRO.

Growth figures may be lower than expected but five years on from disaster we may have seen the worst of the economic turbulence and we are seeing signs of a global synchronised economic growth.

Eurozone growth slows: what the experts say

The slowdown in eurozone growth to a near-standstill must send a chill through Brussels this morning.

Analysts are warning that the recovery is even more fragile than we thought – with the weaknesses in France and Italy threatening to derail efforts to reform their economies.

Nicholas Spiro of Spiro Sovereign Strategy has an uncompromising view of the meagre 0.1% rise in GDP. The “much-trumpeted economic recovery” has already faltered.

Spiro writes:

The chronic phase of the crisis in Europe’s ill-managed single currency area is clear for all to see.

While the slowdown extends to Germany, it’s the dire state of the French and Italian economies that looms large. Outright contractions in GDP in Italy and, more worryingly, France throw the protracted nature of Europe’s downturn into sharp relief – particularly at a time when Spain’s economy is at least showing some signs of life.

The eurozone’s second and third-largest economies, which together account for nearly 40% of the bloc’s output, have become the “sick men” of Europe, mired in economic crises of varying degrees of severity and politically unable to carry out meaningful structural reforms.

What’s particularly troubling is that the economic fortunes of France and Italy haven’t improved since the end of the third quarter: the contraction in France’s manufacturing sector deepened in October while Italian retail sales dropped at their fastest pace in three months.

While Howard Archer of IHS Global Insight warns that the recovery will remain “gradual and vulnerable”:

It was particularly disappointing to see France suffer a renewed dip of 0.1% quarter-on-quarter in GDP which highlights concern about its underlying competitiveness. There was also a more than halving in the German growth rate to 0.3% quarter-on-quarter in the third quarter from 0.7% in the first, although the economy still looks to be in relatively decent shape.

Better news saw Spain eke out marginal growth of 0.1% while the Italian economy essentially stabilized following extended contraction, although concerns persist about the ability of both countries to develop and sustain genuine recove

Greece’s recession may be easing, but there’s no end to its unemployment crisis.

Greek GDP fell by 3% in the July-September quarter compared to a year ago, which is a softer decline than the 3.7% annual contraction reported in Q2.

Reuters says it’s the smallest annual drop in Greek GDP in three years. Quarter-on-quarter data isn’t available.

The jobless rate, though, was 27.3% in August, according to separate data, matching July’s rate (which was revised down from 27.6%).

After six years of recession and austerity, Greece’s unemployment rate remains twice the eurozone average (a record high of 12.2%).

Updated

Confirmation that Cyprus’s economy continues to suffer from the trauma of its bailout programme.

Cypriot GDP shrank by 0.8% in Q3, which means that that 5.7% of national output has been lost over the last year.

Not a surprise, as Cyprus’s once-dominant banking industry has been brought to its knees this year. Capital controls still restrict how much money people can withdraw at the bank, and large depositors with over €100,000 have seen their accounts frozen, and hefty haircuts imposed.

The euro has weakened this morning, dropping 0.3% against the US dollar to $1.3444.

Eurozone economic growth has been lagging behind America’s for most of the last two years, as this graph shows:

GDP in America (where the Federal Reserve is operating much looser monetary policy than the European Central Bank) rose by around 0.7% in the third quarter.

Eurozone GDP up just 0.1%

So, it’s official, the eurozone’s recovery from recession stumbled over the summer and early autumn with GDP rising by just 0.1% in the third quarter of the year.

That’s a slowdown compared to the growth of 0.3% achieved in the second quarter of the year, when the euroarea exited recession.

If you’ve been with us all morning, you’ll know that France’s economy was a drag on growth, contracting by 0.1%. Germany’s growth of 0.3% was in line with forecasts. But both countries reported weak exports.

The official release from Eurostat is here.

On a year-on-year basis, the eurozone economy remains 0.4% smaller than in the third quarter of 2012.

Updated

Eurostat also reports the GDP across the wider European Union rose by 0.2% in July to September.

Eurozone GDP up just 0 .1%

JUST IN: The eurozone grew by 0.1% in the third quarter of 2013.

Nearly time for the big number…. GDP for the eurozone as a whole. Economists expected a 0.2% rise in output across the region.

Portugal GDP up 0.2%

Portugal’s economy is still growing, but it’s also suffered a sharp slowdown.

Portuguese GDP rose by 0.2% in the last quarter, compared to the strong 1.1% expansion reported in Q2.

Still, there should be relief in Lisbon that it remains out of recession, as its austerity programme continues.

On a year-on-year basis, Portugal’s economy is 1.0% smaller than a year ago.

German GDP: What the analysts say

Back to the eurozone, and many analysts are pointing out that Germany’s 0.3% rise in GDP was due to domestic demand.

As flagged up 7.28am, Germany’s statistics body reported that the balance of exports and imports had a downward effect on GDP growth.

Interesting timing, given the EC yesterday announced an in-depth probe into whether Germany’s large, persistent trade surplus harms the rest of the eurozone.

 Marc Ostwald of Monument Securities writes:

The [eurozone] core and semi-core is seen slowing as per the as expected German 0.3% q/q (paced exclusively by domestic demand, for those idiots at the EU wasting money on investigating Germany’s Current Account surplus) and France’s very unsurprising, but lower than forecast -0.1% q/q GDP.

ING analyst Carsten Brzeski said Germany “remains the stronghold of the Eurozone,” adding:

there is little reason to doubt the stability of the German economy

Oliver Kolodseike of Markit reckon the German economy remains on course:

Although the pace of expansion eased from the second quarter, survey data for Q4 so far suggest the German economy is on track to meet the governments’ expectation of an annual 0.6% rise in 2013.

UK retail sales drop

Just in, a surprise fall in UK retail sales.

Retail sale volumes fell by 0.7% in October, surprising analysts who’d expected that sales would have been flat compared with September.

Stripping out fuel, sales were down by 0.6%, according to the Office for National Statistics.

Clothing sales dropped by 2.1% during the month – suggesting the decent autumn weather deterred people from buying winter coats and the like.

On the upside, sales were still 1.8% higher than a year ago.

Italian GDP falls 0.1%

Italy’s recession continues for a ninth quarter, but the end may be in sight.

Italian GDP fell by 0.1% in the three months to September, in line with expectations. That means the pace of contraction slowed, following a 0.3% drop in GDP between April and June.

It’s the smallest quarterly drop in Italian GDP since its recession began in the third quarter of 2011 as this table shows (more details here)

Italian GDP is down by 1.9% over the last year, INSEE reported. It also revised down its data for the second quarter, to show a 2.2% annual decline (from a first estimate of 2.1%).

Dutch GDP up 0.1%

The Netherlands has emerged from recession.

Dutch GDP grew by 0.1% in the third quarter of the year, according to Statistics Netherlands which also revised up its estimate for Q2 to show that GDP was flat, rather than contracting by 0.1% as first thought.

The Netherlands benefited from rising exports in the last quarter, which grew 2.1% year-on-year. Household consumption was down 2.3%.

On an annual basis, though, the Netherlands economy remains 0.6% smaller than a year ago.

Updated

French GDP falls 0.1%: What the economists say

Diego Iscaro of consultancy IHS:

The new contraction in activity will definitely not help President Hollande to improve his popularity among the electorate – which currently stands at a record low.

Moscovici: France isn’t going back into recession

Back to France. Finance minister Pierre Moscovici has insisted that the French economy is not sliding back into recession.

He’s sticking to his forecast of 0.1-0.2% growth this year, despite the disappointing news that GDP fell by 0.1% in July-September.

Speaking on RTL Radio, Moscovici blamed one-off factors such as slowing aircraft orders (the Paris Air Show, in June, typically delivers a boost to industry), saying:

The productive forces are starting up again, production is recovering

We knew the third quarter would mark a pause, it’s not a surprise, it’s not an indicator of decline, it’s not a recession.

Moscovici was pretty bullish three months ago when France officially exited recession, hailing the ‘encouraging signs of recovery’.

To avoid a double-dip recession, France now has to grow its GDP in the current quarter.

Key event

Europe’s stock markets have opened strongly.

Instead of fretting about the eurozone’s woes, traders are taking comfort from testimony released by the next head of America’s central bank overnight.

In prepared remarks for the Senate Banking Committee, Janet Yellen said the US labour market and the wider economy were “far short” of their potential. She warned:

We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession.

And that’s being taken as a sign that the Federal Reserve is in no hurry to slow its stimulus programme, which is pumping $85bn of new money into the US economy every month.

Cue a stock market rally, sending the FTSE 100 up 1% or 66 points to 6693. Yesterday it fell on speculation that the Bank of England is closer to tightening monetary policy, because Britain’s economic recovery is gathering pace.

  • German DAX: up 0.8%
  • French CAC: up 1.06%
  • Italian FTSE MIB: up 0.7%
  • Spanish IBEX: up 1%

Yellen testifies before the committee at 10am local time, or 3pm GMT.

Decent GDP data from Hungary — its economy grew by 0.8% in Q3, twice as fast as expected.

On an annual basis Hungarian GDP was 1.7% higher. That’s the fastest rate since the first quarter of 2011 says Reuters.

Austrian GDP: up by 0.2%

Austria’s economy grew by 0.2% in the third quarter of the year, helped by a small rise in exports.

Its WIFO statistics body also revised down Austrian GDP growth in the second quarter to 0.0%, from 0.1%.

WIFO also reported that exports rose 0.2% in the last quarter, while imports were up 0.1%.

That 0.1% contraction means France’s economy has been outperformed by Spain for the first time since early 2009.

Spain’s economy grew by 0.1% in the last quarter, according to official data release on October 30.

The small contraction in France, and the slowing growth in Germany, shows that the euro area economy remains weak despite dragging itself out of recession in the summer.

Other countries are doing better. Overnight, Japan reported that its GDP rose by 0.5% during Q3, beating forecasts of 0.4% growth (but slower than the 0.9% in Q2).

Britain grew by 0.8% in the third quarter of 2013, while America posted quarterly growth of around 0.7%.

Here’s AP’s early take on the news that French GDP shrank by 0.1% in the third quarter, dashing hopes of a small expansion:

French economy shrinks after surprise rebound 

The French economy is shrinking again, statistics showed Thursday, underscoring that it is still in trouble despite a rebound last quarter.

The French national statistics agency, Insee, said that gross domestic product fell 0.1 percent in the July-to-September quarter. That comes after an unexpectedly large rebound of 0.5 percent in the second quarter that pulled France out of recession. Economists had said that rebound was partially due to technical effects and that France would likely not sustain that kind of growth in the near term.

The latest figures showed that exports, which had been a big factor in France’s rebound, fell sharply. Some corporate investment was also down and household spending slowed.

Last quarter, the French government hailed the growth figure as a proof that its reforms were beginning to bear fruit, although it cautioned that more time was needed. But many economists said that the rebound was artificially pumped up by such things as high energy use during a particularly cold winter and spring. They contended that France still needs to make significant changes to make its economy more competitive.

For example, economists say that France’s cost of labor, even after a tax credit, is still too high. State spending also needs to be cut, so France doesn’t rely so heavily on taxes to meet its deficit obligations. That leaves France in a tight spot, since it’s difficult to cut spending while the economy is still floundering.

[end]

The full statement from INSEE is online here, including this chart:

Germany’s statistics body warned that trade was weak in the last quarter, pulling GDP growth down to +0.3%.

Instead, “positive impulses exclusively from inside Germany” drove growth, the Statistics Office said. It reported that spending by private households and the state rose during the quarter, as did business investment.

By contrast, the contribution from abroad (exports minus imports) put a brake on GDP growth.

France’s economy also suffered from weak trade, with exports dropping by 1.5%.

German GDP released

The German GDP data is out, and it’s more positive than the news from France.

Germany’s economy grew by 0.3% in the third quarter of 2013. That’s in line with expectations, but is slower than the 0.7% growth achieved in the second quarter of this year.

On an annual basis, the German economy is 1.1% bigger than a year ago.

French GDP data shows economy contracted

Good morning, and welcome to our rolling coverage of events across the world economy, the financial markets, the eurozone and the business world.

Is Europe’s economy healing, or is the nascent recovery that began in the summer already petering out? We’ll find out this morning, with the publication of new growth data for the third quarter of 2013.

And the early news is not encouraging. France’s economy shrank by 0.1% in the three months to September, according to provisional data from its statistics body.

That’s worse than expected, following the 0.5% growth reported in Q2.

The small drop in GDP was due to a sharper decline in trade, with French exports falling by 1.5%. Business investment dropped by 0.6%.

It’s another blow to embattled French PM Francois Hollande, just a week after S&P downgraded France’s credit rating.

Lots more data still to come, including the first estimate of German and Italian economic growth.

The full reading for the eurozone is due at 10am GMT. Economists had predicted that euro area GDP would have have risen by 0.2% – the news from France, though, may have sent them scrabbling to rework their sums….

I’ll be tracking all the GDP data, reaction, and other news through the day.

Updated

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USA 

While jobs growth and output are rising fast in the construction industry, retail offers a more mixed picture of the UK economy. Forecasting groups have modest expectations for growth in 2014: a 2% increase in GDP following 1.4% in 2013…

 


Powered by Guardian.co.ukThis article titled “Construction and retail – contrasting perspectives on UK economic recovery” was written by Larry Elliott, economics editor, for The Guardian on Tuesday 5th November 2013 00.01 UTC

Construction and retailing offer contrasting perspectives on Britain’s economic recovery. On the UK’s building sites, things are looking up . The monthly construction industry health check from CIPS/Markit showed jobs growth and output rising at their fastest for six years. Although that may be more a reflection of the deep hole the sector plunged into during the recession, sentiment has certainly improved. The Government’s Help to Buy scheme has boosted house building, but Monday’s report suggests demand for commercial property is also on the up.

Tuesday’s report from the British Retailers Consortium is more mixed. After a strong summer, spending growth in the high street has cooled in the last couple of months. That could be because sales of new winter fashions have been hit by unseasonally warm weather, or it could be that consumers are saving up for a big splurge at Christmas. It could be that individuals are finding it hard to make the sums add up during a prolonged period when prices have been rising more quickly than wages. In all probability, the cautious mood is a combination of all three.

Rising consumer spending is the reason economic activity picked up in the second and third quarters of the year. There was little boost from the other components of growth -– investment, exports and the state – so the expansion was the result of higher household spending. How is this possible when real earnings are falling? In part, spending has been encouraged by rising employment. In part, it has been aided by stronger consumer confidence, which has led to people running down the precautionary savings they built up when they were more pessimistic about the future.

Clearly, consumers will be unable to continue dipping into their savings to fund their spending for ever. That’s why forecasting groups such as the National Institute for Economic Research have only modest expectations for growth in 2014: a 2% increase in GDP following 1.4% in 2013. NIESR sees little prospect of stronger investment kicking in, and with the prospects for exporters decidedly mixed that means consumers will again bear the strain.

Even so, the NIESR forecast looks too low. There will be some recovery in investment in response to stronger consumer spending. More significantly, perhaps, the housing market now has real momentum and that will lead to some further drop in the savings ratio to compensate for squeezed incomes.

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Minutes of latest monetary policy committee meeting signal interest rates could rise sooner than 2016. Bank of England policymakers have been surprised at how rapidly growth has picked up and unemployment has fallen since the spring…

 


Powered by Guardian.co.ukThis article titled “Growing evidence of ‘robust recovery’ in UK economy, says Bank of England” was written by Heather Stewart, for theguardian.com on Wednesday 23rd October 2013 10.34 UTC

Bank of England policymakers have been surprised at how rapidly growth has picked up and unemployment has fallen since the spring, raising the prospect of an earlier-than-expected rise in interest rates.

The Bank’s nine-member monetary policy committee voted unanimously to leave policy unchanged earlier this month; but minutes of their meeting showed that a strong increase in employment, and upbeat readings from business surveys, had prompted them to upgrade their expectations for growth.

Discussing the upbeat jobs data released this month, the minutes said: “It now therefore seemed probable that unemployment would be lower, and output growth faster, in the second half of 2013 than expected at the time of the August Inflation Report.”

They described the latest news as pointing to a “robust recovery in activity” in the UK – though they also warn about the lack of the kind of rebalancing in the economy, towards trade and away from consumer spending, that the coalition was hoping for. “There is a risk that the recovery in the United Kingdom might be less well balanced between exports and domestic consumption than was ultimately needed.”

One of the Bank’s first decisions after its governor, Mark Carney, joined in July was to issue “forward guidance”, promising to keep interest rates unchanged until the unemployment rate falls to 7%, barring a surge in inflation.

When the policy was unveiled in August, Carney said he expected unemployment to remain above 7% at least until 2016; but a slew of data, including a fall in the unemployment rate to 7.7% in the three months to July, had raised doubts in markets about whether the Bank would wait so long before deciding to act. Wednesday’s minutes suggest the MPC may be coming round to the idea that the 7% threshold could be reached sooner, though the committee stressed that “it was too early to draw a strong inference about future prospects from the latest data”.

Simon Wells, UK economist at HSBC, said: “We expect the MPC to bring forward the timing of unemployment hitting the 7% threshold by around two quarters when it revises its forecasts in November.”

Discussions among MPC members also highlighted the growing strength of Britain’s housing market, which they expect to boost the economy. “Overall, indicators pointed to continued house price rises. This would increase the collateral available to both households and small businesses, which could provide some further support to activity,” the minutes say.

In the latest indication of a revival in the property market, the British Bankers Association announced on Wednesday that the number of mortgages approved by UK banks to fund house purchases reached 42,990 in September, its highest level in almost four years and well above the previous six-month average of 42,990.

The BBA data, which covers the run-up to the launch of Help to Buy mortgage guarantee scheme, shows that activity in the housing market continued to gain momentum over the summer, with house purchase loans showing the biggest increase month-on-month.

The BBA said its members approved new loans worth a total of £10.5bn in September, up from £9.9bn in August and above the six-month average of £9bn. Of this, £6.7bn was for house purchases and £3.5bn for remortgages. The remainder was other secured borrowing.

The BBA statistics director, David Dooks, said: “September’s figures build on the growing picture of improved consumer confidence, with stronger gross mortgage lending, rising house purchase approvals and increased consumer credit.”

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Bank of England governor’s move to persuade markets that interest rates will not immediately rise has provoked skepticism. His first 100 days as Bank of England governor have been a noisy medley of speeches, impeccably tailored photo-calls and pzazz…

 


Powered by Guardian.co.ukThis article titled “Is Mark Carney’s forward guidance plan a step backwards?” was written by Heather Stewart, for theguardian.com on Monday 7th October 2013 14.00 UTC

If Mark Carney was going to live up to his billing as a “rock star central banker” – and his £874,000 a year pay package – he had to arrive in Threadneedle Street on a crashing crescendo. His first 100 days as Bank of England governor have been a noisy medley of speeches, impeccably tailored photo-calls and pzazz.

From the need for more women on banknotes to his love of Everton football club, Carney has had plenty to say on a range of subjects since his appointment on 1 July this year. However, it’s the Bank’s new policy tool of forward guidance that has provoked the most interest, and a good measure of scepticism, among seasoned Bank-watchers.

Honed by Carney in Canada and adopted by the US Federal Reserve and the ECB in different forms, forward guidance is a way of signalling to the public and financial markets how the Bank will respond to shifts in the economy. In this case, the monetary policy committee has pledged to keep interest rates at their record low of 0.5% at least until the unemployment rate falls to 7%.

“Forward guidance is an attempt to persuade the markets that interest rates are not immediately going to go up,” says John Van Reenen, director of the Centre for Economic Performance at the London School of Economics. “It’s one more tool in the toolbox.”

However, as implemented by Carney and his colleagues in the UK, guidance is hedged about with three separate “knockouts” – rates would rise if inflation, financial stability or the public’s inflation expectations got out of control. Moreover, the governor has stressed that the 7% unemployment rate is not a trigger for a rate rise, but a “staging post”, which will not necessarily prompt tighter policy.

During a somewhat fraught hearing with MPs on the cross-party Treasury select committee last month, in which Carney sought to clarify the policy, chairman Andrew Tyrie expostulated that it would be a hard one to explain “down the Dog and Duck”.

Financial markets have also been less than convinced. The yield, or effective interest rate, on British government bonds – partly a measure of investors’ expectations of future interest rates – has risen rather than fallen since the Bank’s announcement. That is partly because the latest data suggests the economic outlook is improving, but rapidly rising bond yields can be worrying because they tend to push up borrowing costs right across the economy. Carney, though, has insisted he is not concerned.

Meanwhile the pound has risen almost 4% against the dollar since Carney took the helm – again signalling markets expect rates to rise sooner than the Bank is indicating. Last week sterling hit a nine-month high, although it came off that peak as investors began to question if the UK’s recovery could continue at its current pace.

“I don’t think in practice forward guidance is very successful,” says Jamie Dannhauser of Lombard Street Research. He believes Carney has failed to convince the City he means business, because he has failed to back up forward guidance with action, such as the promise of a fresh round of quantitative easing – the Bank scheme that has pumped £375bn of freshly minted money into the economy.

“[Forward guidance] doesn’t work if you’re not willing to take on the markets if you don’t get your way,” says Dannhauser.

David Blanchflower, a former member of the MPC, is more blunt: “He looks already, within a hundred days, to have lost control. Bond yields are rising, the pound is rising like mad, and they’ve got no response.”

He argues that the hedged nature of the new policy is likely to reflect “horse-trading” between Carney and his fellow MPC members. Unlike in Canada, where what the central bank governor says goes, decision-making on the MPC is by vote. With a recovery now under way, its various members are known to have differing views on what are the most pressing risks to the economy.

Another former MPC member said: “Had I been on the MPC I would have let him do it [forward guidance], because I don’t think it does any particular harm; but I don’t think it does much good either.”

It’s not just the Bank’s approach to monetary policy that has changed on Carney’s watch. When outgoing deputy governor Paul Tucker, who missed out on the top job, leaves for the US later this month, it will mark the latest in a number of personnel changes that are starting to make Carney’s Bank look quite different from Lord (Mervyn) King’s.

Blue-blooded banker Charlotte Hogg joined as the Bank’s new chief operating officer, a post that didn’t exist under the old regime, on the same day as Carney. Meanwhile Tucker will be replaced by former Treasury and Foreign Office apparatchik Sir Jon Cunliffe. With long-serving deputy governor Charlie Bean due to leave early in 2014, Carney will be given another opportunity to bring in a new broom.

Insiders say the atmosphere in the Bank’s Threadneedle Street headquarters has already changed. Carney is often seen eating lunch in the canteen or showing visitors around. His approach is less hierarchical than that of King, who was derided as the “Sun King”, by former chancellor Alistair Darling – though Carney is said to be no keener on intellectual dissent than his predecessor.

He will need all the allies he can get both inside and outside the Bank, if he is to deal successfully with what many analysts see as the greatest threat facing the economy: the risk that an unsustainable bubble is starting to inflate in Britain’s boom-bust housing market.

Carney and his colleagues on the Bank’s Financial Policy Committee (FPC), the group tasked with preventing future crashes which partly overlaps with the MPC, have new powers to rein in mortgage lending if they believe a bubble is emerging, and the governor has said he won’t hesitate to use them.

But the FPC is untested and largely unknown to the public, and bubbles are notoriously hard to spot. Using the FPC’s influence to choke off the supply of high loan-to-value mortgages, for example, would be hugely controversial at a time when large numbers of would-be buyers have been frozen out of the market. Meanwhile, the government’s extension of the Help to Buy scheme, with details to be laid out on Tuesday, is likely to increase the demand for property, potentially pushing up prices.

Van Reenen warns that if property prices do take off, Carney could find himself in an unenviable position. “We have this terrible problem in this country that house prices have got completely out of kilter with incomes. I would be very reluctant to see interest rates start pushing up. Using other methods, such as being tougher on Help to Buy, and trying to do things through prudential regulation is better – but the fundamental thing is lack of houses, and Carney can’t do anything about that.”

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Organization for Economic Co-operation and Development gives vote of confidence in the United Kingdom’s economy, revising growth forecast from 0.8% to 1.5% after a “string of positive indicators from the UK”…

 


Powered by Guardian.co.ukThis article titled “UK economy upgraded by OECD” was written by Heather Stewart, for theguardian.com on Tuesday 3rd September 2013 09.52 UTC

Paris-based thinktank the Organisation for Economic Co-operation and Development has lifted its forecast for UK growth in 2013, in the latest vote of confidence for the fledgling recovery.

In May, when it last released projections for the world’s major economies, the OECD was expecting 0.8% growth in the UK for 2013. On Tuesday, it said recent survey evidence suggested GDP would expand by 1.5%, grouping the UK with the US and Japan as economies where, “activity is expanding at encouraging rates”.

The upgrade from the OECD comes after a string of positive indicators for the UK, including stronger-than-expected growth of 0.7% in the second quarter, falling unemployment, and survey evidence suggesting the strongest growth in manufacturing output for almost two decades.

Alongside revising up its forecast for the UK, the OECD used its interim economic assessment to warn that while a moderate recovery is underway in many major economies, global growth remains sluggish, and there are still risks to the upturn.

The OECD’s economists single out the impact of the Federal Reserve’s plans to phase out its massive programme of quantitative easing as creating particular problems for some economies.

“In many emerging economies, loss of domestic activity momentum together with the shift in expectations about the course of monetary policy in the United States and the ensuing rise in global bond yields have led to significant market instability, rising financing costs, capital outflows and currency depreciations,” it said.

Countries including India, Indonesia, Brazil and Turkey have been battling to control a potentially destabilising decline in their currencies since the Fed chairman, Ben Bernanke, announced his plans to “taper” QE in May.

The OECD’s experts warn that the slowdown in emerging economies – which have been major drivers of world growth in recent years – would offset the improvement in advanced economies, so that the global recovery would continue to be, “sluggish”.

In the US, the OECD expects growth to be 1.7% in 2013, slightly down on its May estimate of 1.9%. It also warns that the crisis in the eurozone is far from over, saying: “The euro area remains vulnerable to renewed financial, banking and sovereign debt tensions. Many euro area banks are insufficiently capitalised and weighed down by bad loans.”

guardian.co.uk © Guardian News & Media Limited 2010

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The UK service sector has posted its biggest leap in activity in over six years. Germany drags the eurozone back to growth. The head of the Dallas Federal Reserve Bank has declared that the Fed is almost ready to start slowing the US monetary stimulus program…

 


Powered by Guardian.co.ukThis article titled “Eurozone private sector returns to growth, as UK service sector surges to six-year high – as it happened” was written by Graeme Wearden, for theguardian.com on Monday 5th August 2013 13.28 UTC

6.21pm BST

Closing summary

Time to wrap up for the day.

Here’s a brief closing summary.

The UK service sector has posted its biggest leap in activity in over six years. The monthly PMI survey, conducted by Markit, jumped to 60.2 in July, showing strong growth, and suggesting the UK recovery continues to pick up pace.

Details from 9.,39am onwards.

Analyst reaction at 10.14am

There was also optimism in the eurozone that the recession is over. PMI surveys from the region indicated that its private sector had finally returned to growth. Germany led the way, and there were signs of stabilisation in Spain and Italy.

The eurozone data is covered at 9.18am

The key highlights by country begin at 8.31am

• However, other countries performed less strongly. Brazil (see 2.19pm), India and Russia (8.10am) all saw a fall in service sector activity.

Meanwhile in the eurozone…

there were fresh protests against public sector job cuts in Greece (see 1.24pm and 12.50pm)…

…as Italy remained gripped by Silvio Berlusconi’s conviction for tax fraud (see 11.12am)…

…and the IMF urged France to rein in its austerity programme in 2014 (see 4.41pm)

I’ll be back tomorrow. Thanks for the great comments, as ever, and goodnight. GW

Updated at 6.23pm BST

5.55pm BST

Markets close

After a bright opening, Europe’s stock markets have closed with losses in London, and little change elsewhere today.

The news that Britain’s service sector enjoyed a bumper July, and that the eurozone private sector returned to growth, didn’t spark much of a rally.

In London, the FTSE 100 was dragged down by HSBC — which warned of an emerging market slowdown in today’s financial results.

David Madden, market analyst at IG, commented:

In London, the banking sector dragged the market lower after HSBC’s first-half figures were good but not good enough to entice traders to go long.

The largest bank in Europe announced an increase in profit but fell below expectations, prompting traders to unload their positions in the Asian-focused bank. Natural resource stocks initially propped up the FTSE but as the day went on dealers lost their appetite for risk.

And here’s the closing prices:

• FTSE 100: down 28 points at 6619, -0.43%

• German DAX: down 8 points at 8398, -0.1%

• French CAC: up 4 points at 4049, +0.1%

• Italian FTSE MIB: down 21 points at 16757, -0.13%

• Spanish IBEX: down 13 points at 8,560, -0.15%

5.27pm BST

If the cap doesn’t fit….

In the world of banking, HSBC is considering responding to the EU’s cap on bonus payments by boosting the basic salaries paid to its staff.

Our City editor, Jill Treanor, reports:

Speaking from Hong Kong, [chairman Douglas] Flint said one of the options being considered to tackle the bonus cap was a potential pay rise for staff and he said he was confident that shareholders would support policies intended to keep the bank competitive.

"We are looking at a whole range of things," he said.

Here’s the full story: HSBC may raise banker pay to overcome bonus cap

Updated at 5.40pm BST

4.55pm BST

Fed’s Fisher: Tapering is looming

Over in America, the head of the Dallas Federal Reserve Bank has declared that the Fed is almost ready to start slowing the US monetary stimulus programme.

President Richard Fisher told the National Association of State Retirement Administrators that the moment of ‘execution’ on ‘tapering’ the US bond-buying programme (currently bn per month) was close.

Here’s the key quote:

Having stated this quite clearly, and with the unemployment rate having come down to 7.4%, I would say that the (Fed’s policy-setting) committee is now closer to execution mode, pondering the right time to begin reducing its purchases, assuming there is no intervening reversal in economic momentum in coming months.

Fisher also declared that the Fed must avoid ‘market havoc’ when it begins to withdraw the QE punchbowl – having already seen stock markets tumble in May when the prospect was first floated.

4.41pm BST

IMF: France is recovering

The International Monetary Fund has offered the French government some support, and urged Francois Hollande to slow the pace of austerity next year.

France has been criticised for not taking more decisive action to cut its deficit, which is forecast to be 3.9% of GDP this year. But the IMF reckons Paris’s priority must be growth next year, meaning Hollande should ease up on fiscal consolidation.

In its latest report (online here), the IMF warned:

The pace of adjustment should be eased in 2014 relative to current plans in order to support the recovery. Adjustment should also be rebalanced toward expenditure containment.

The IMF also ruled out a surge in growth later this year, predicting that French GDP would shrink by 0.2% in 2013. It also predicted meagre growth in 2014, of just 0.8%.

4.26pm BST

More from JP Morgan. Senior economist Joe Lupton says the global economy made "a positive start" to the third quarter of 2013, but warned:

Although the stronger performance signalled is pleasing in itself, the structure remains uncomfortably uneven by region, particularly with regard to job creation.

4.17pm BST

Global private sector activity hits 16-month high

JP Morgan has added up all July’s PMI data, and concluded that the global services sector posted a healthy increase in activity last month, from 51.1 to 54.9.

This meant stronger growth across the global private sector too, with a PMI of 54.1, the highest level in 16 months, up from 51.2 in June.

Here’s the details:

Updated at 4.24pm BST

4.03pm BST

Putin pays Berlusconi a visit

Back to Italy, where Silvio Berlusconi is receiving a friendly visit from none other than Russian president Vladimir Putin.

That’s according to La Stampa, which reports that "Vladimir Putin, President of Russia, arrived in Rome to meet with his great friend Silvio Berlusconi".

Berlusconi’s conviction for tax fraud clearly didn’t deter Putin from making the date to see his long-time ally.

More here: Putin in visita da Berlusconi

3.45pm BST

This handy graph from Reuters compares the service sector growth in the US (dark blue), the eurozone (light blue) and China (green) over the last five years:

Larger version here.

Updated at 3.51pm BST

3.34pm BST

Duncan Weldon: 5 thoughts on the service sector surge

Duncan Weldon, the TUC’s senior policy advisor, agrees that the jump in British service sector output in July (9.39am) is good news.

He cautions, though, that the economy is still a tough place for many people.

He’s blogged five quick thoughts on the data, including:

Third, the real measure of the recovery will be found in falling unemployment and rising real wages and living standards. We have a triple crisis of jobs, wages and investment and a very long way to go to get out of them.

Here’s the full piece:

The Service Sector PMI: 5 Quick Thoughts

Updated at 5.06pm BST

3.16pm BST

US service sector also posts strong growth

America’s services sector has followed the UK by posting forecast-smashing activity for July.

The US ISM Non-Manufacturing Composite index (which measures its service sector) jumped to 56.0 last month, up from the three-year low of 52.2 reported in June.

That’s the highest reading since February, and indicates much stronger growth. Economists had expected a reading of 53.1.

The jump in the monthly index was mainly due to a surge in new orders (the sub-index leapt to 57.7 from 50.8 in June).

2.48pm BST

2006 and all that

Last month’s surge in UK service sector activity (see 9.39am onwards) is the best monthly performance in over six years. Apart from that, though, July 2013 and December 2006 have little else in common.

The recession, and its aftermath, has pushed Britain’s jobless rate up to 7.8%, from 5.5% six and a half years ago. Interest rates were 5% – compared to 0.5% today. And Tony Blair hadn’t got round to swapping Downing Street for a new career as Middle East envoy and JP Morganite.

My colleague Angela Monaghan has more here:

UK service sector high: the last time we had it so good was 2006

Updated at 2.48pm BST

2.19pm BST

Brazil’s private sector activity falls

More economic data, this time from Brazil — where service sector activity has fallen.

Markit’s Brazilian Services PMI dropped from 51.0 in June to 50.3 in July. That’s enough to drag the wider private sector PMI down to 49.6, into contraction territory.

New orders fell and job creation was unchanged.

It’s another sign of slowing growth in emerging markets, after India’s service sector output shrank for the first time since October 2011 (see opening post).

The drop in activity was also blamed on the anti-government protests which began in cities across Brazil in June.

Updated at 2.28pm BST

1.24pm BST

Photos: Greek workers march

A few more photos from Athens of today’s protest by employees from the Greek Manpower Employment Organization and the social security offices (as mentioned at 12.50pm):

12.57pm BST

Strike watch (2): German canal workers protest

Greece isn’t the only country experiencing industrial action today. In Germany, the country’s canal workers have downed tools today in a row over job cuts.

Transport on the country’s canal network is likely to be hit, as Reuters reports:

Several canals in Germany will be partially blocked to cargo shipping this week due to renewed strikes by lock operators, German trade union Ver.di said on Monday.

The strikes, set to last the rest of the week, are in protest against government plans to restructure the German inland navigation authority WSA.

Traders said they did not expect the strikes to cause widespread disruption and that shipment delays were likely to be local and restricted to smaller canals.

12.50pm BST

Strike watch (1): Protests in Athens over public sector cuts

In Greece, workers at the country’s employment offices pension fund are holding a walk-out today in the latest protest at planned job cuts.

Despite regular protests, the Athens government continues to push on with its targets for cutting 15,000 pubilc sector positions by the end of 2014.

Administrative reform minister Kyriakos Mitsotakis told Mega TV that 12,500 workers will be transferred to the new labour pool (which can lead to redeployment or redundancy).

Mitsotakis said:

The truth is that the ministries have lived up to the commitment they made to the prime minister and we have formed a clear timeline about how we will keep to one of our main pledges to have 12,500 people in the scheme by the end of September.

More here: Mitsotakis confident Greece will meet civil service target by September

Updated at 1.17pm BST

12.06pm BST

The latest retail sales from the eurozone show that the region’s consumers are still facing hard times.

Sales across the euro area sales in the euro zone fell for the first time in three months in June, dropping 0.5% compared with May, as households continued to struggle.

The largest monthly decreases were registered in Estonia (-3.3%), Hungary (-1.9%), Austria (-1.7%) and Germany (-1.5%)

Malta (+1.8%), Luxembourg (+1.3%) and Denmark (+1.2%) bucked the trend with rising sales compared with May.

And on a year-on-year basis, recession-hit Spain showed the largest decline, falling by 6.9% compared with June 2012.

11.28am BST

Key event

Here’s our full news story on the UK service sector’s knock-out performance last month:

UK service sector hits pre-crisis levels, boosting growth hopes

11.26am BST

Alberto Nardelli: Italian government’s lifetime is shortened

Speaking of Silvio Berlusconi (11.12am), political analyst Alberto Nardelli flags up that the next key development is a vote in the Senate in September to rubberstamp his sentence:

As the odds are significantly stacked against Berlusconi (8-15 in the committee which decides on immunity, and 117-198 in the senate itself which would need to vote on the committee’s decision), he may decide to directly step down as a senator. Berlusconi will also need to decide (by mid-October) how he intends to serve his one year sentence (house arrest or community service).

Nardelli also suggests that Italy faces the real prospect of another election within the year:

In summary, I believe the lifetime of the current government has been inevitably shortened and I wouldn’t bet on it lasting a full-term, and 12 more months are probably also optimistic at this point. The earliest an election could take place is November, but a spring 2014 election is more likely.

More here: Italy – what could happen next (politically)

11.12am BST

Berlusconi conviction still grips Italy

Silvio Berlusconi continues to dominate the news in Italy following his failure to overturn a conviction and jail term for tax fraud last weekend.

Yesterday, hundreds of supporters gathered outside the former PM’s home to protest against the sentence, and were treated to a classic appearance from Berlusconi himself.

Despondent at one stage, and celebratory at another, Berlusconi insisted he was innocent, while also showing support for the country’s coalition.

He declared:

I am here. I am staying here. I won’t give up. We will continue together to fight this battle for democracy and freedom.

(full story by Lizzy Davies here)

Senior members of Berlusconi’s People of Freedom (PdL) party are due to meet President Giorgio Napolitano today to discuss his future.

The ANSA news agency reports:

PdL Senate whip Renato Schifani and House whip Renato Brunetta are expected to discuss ways to make it possible for Berlusconi to stay active in politics after the four-year prison sentence – three of which have been commuted because of an amnesty – comes into effect in October.

PdL supporters are pushing for Berlusconi to be pardoned. But, as ANSA explains, that’s a tough sell:

This could be difficult for Napolitano to do for many reasons, including the fact that Berlusconi is appealing against two other criminal convictions, a seven-year sentence for paying for sex with an underage prostitute and a one-year term for involvement in the publication of an illegally obtained wiretap.

10.49am BST

FTSE 100 rises on Lloyds sell-off rumours

Europe’s stock markets hit two month highs this morning, following the news that the eurozone private sector returned to growth last month (see 9.18am)

In London, the FTSE 100 is up 12 points at 6660, led by Lloyds Banking Group (+4% at 76/7p). That is driven by speculation that the UK government is on the brink of selling some of its 38% stake in the bank.

My colleague Jill Treanor wites:

Shares in Lloyds Banking Group have hit their highest levels in almost three years amid speculation that the government could begin to sell off its 39% stake in the bailed-out bank.

The shares were trading above 76p on Monday, higher than the 73.6p average price at which the government bought its stake in the bank in 2008 and 2009.

They have now enjoyed a sustained rise since António Horta-Osório, the Lloyds boss, said last week it was now up to the government when and how to sell the shares.

More here: Lloyds shares above 76p, fuelling sell-off expectations

10.23am BST

Pound rallies

Good news for UK readers poised for a well-earned foreign holiday – sterling is strengthening against other major currencies following today’s service sector report.

The pound is up three-quarters of a cent against the US dollar, at .5363, and has also gained half a euro cent against the euro to €1.156.

10.14am BST

UK services sector PMI: what the experts say

City economists agree that today’s strong service sector data (see 9.39am) shows Britain’s recovery is taking root.

Robert Wood of Berenberg headlined his research note "UK: WOW" – underlining the surprisingly strong surge in service sector activity last month.

Wood wrote:

From zero to hero in six months, the UK is flying as tumbling mortgage rates and rising confidence are driving a consumer led recovery. Monetary policy is working….

With continued support from the Bank of England, the quagmire of the past couple of years will recede rapidly in the rear-view mirror. We expect the recovery to move onto a firmer footing next year, supported by rising real wages and recovery in the Eurozone. The UK is certainly not facing a ‘new normal’ of weak growth.

Howard Archer of IHS Global Insight called it a:

show-stopping survey that completes a very impressive hat-trick of improved purchasing managers surveys for July.

Jeremy Cook, chief economist at currency firm World First, commented that ‘the good news keep coming". But Cook also warned that the recovery remains fragile:

The key to this, and the sustainability of the recovery, is the confidence around the employment components of these surveys – jobs will only be added if these levels of growth are sustained. Wages should also increase along the way as well further improving confidence and lessening the gap between wage settlements and price rises.

Although the improvement in the weather has helped things, I do worry about sales being dragged forward from months in the future. There could be a potential ‘deflating of the balloon’ as we move through the rest of the year, and when consumers begin to save cash for the inevitable Christmas splurge.

Economist Shaun Richards also tweeted that Britain made a strong start to the third quarter of 2013:

While Deutsche Bank flags up that the service sector’s growth poses some interesting questions for the Bank of England, which releases its next inflation report on Wednesday (with thanks to The Times’s economics editor, Sam Fleming). The BoE is expected to flesh out its new ‘forward guidance’, effectively promising to keep borowing costs low until the economy improves…..

10.10am BST

Today’s blowout reading comes after six months of steadily rising activity in the UK service sector, as this image shows: (anything above 50 = growth).

9.54am BST

Graph: Britain’s surging services sector

Services makes up around three-quarters of the UK economy, and this graph shows how the surge in activity last month could equate to a jump in GDP:

The full report is online here (pdf).

9.39am BST

UK services data smashes forecasts

Britain’s dominant services sector has recorded its best monthly performance since before the financial crisis began, smashing analyst forecasts and suggesting the recovery is gathering pace.

The UK service sector PMI index has surged to 60.2 up from June’s 56.9. That’s the strongest monthly reading since late 2006, and shows extremely strong growth.

The survey found a solid rise in new orders, driving optimism higher across the service sector. Underlying demand was reported to be stronger, with firms saying they see better conditions both at home and abroad.

Recent good weather in the UK, and a recovery in the housing market, were also credited with driving the service sector in July.

A separate survey last Thursday showed that Britain’s factory activity hit its highest level since 2011 last month.

Taken together, the two reports suggest that Britain’s economic recovery is well underway.

And with the eurozone private sector also returning to growth in July (see 9.18am), Europe’s prospects look brighter.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, commented:

The services sector stormed to a six year high in July, registering levels of performance not seen since before the financial crisis. Combined with the
manufacturing and construction figures, this is the clearest sign yet that the UK economy is experiencing a broad based economic recovery and
has the momentum to deliver continued growth. 

The seventh month of sustained, accelerated growth in services was underpinned by improved market conditions both domestically and abroad. Business confidence for UK services is now the
highest it has been for 15 months, allowing businesses to expand, develop new products and increase their fees.

The steep rise in new business and the sharpest rise in backlogs of work since 2010 have put some pressure on capacity, giving firms the conviction to take on more staff and increase wages, which have been stagnant for a long time. Taken together, these could signal a significant month in the turnaround of the fortunes of UK plc.

More to follow….

9.25am BST

Howard Archer of IHS Global Insight agrees that today’s data (see 9.18am) shows that the eurozone economy has stopped shrinking:

The near stabilization in Eurozone services activity in July fuels hope that Eurozone GDP has finally stopped contracting and is on course to eke out marginal growth over the second half of the year.

Furthermore, all countries saw an improved services performance in July compared to June.

However the recovery will be constrained by tight fiscal policy, record unemployment and "limited consumer purchasing power", Archer added.

9.18am BST

Relief for eurozone as private sector starts expanding

It’s official… the eurozone’s battered private sector has posted a rise in activity for the first time since January 2012.

Markit’s survey of thousands of firms across the eurozone showed a final private sector PMI reading of 50.5, which indicates output has risen.

The region’s service sector has almost returned to growth, while data last Thursday shows that manufacturing activity increased last month.

Markit said that the Eurozone economy has stabilised as the "German recovery accelerates and downturns ease in France, Italy and Spain" (see 9.01am for the data). Job losses slowed, and business confidence hit a 16-month high.

Here’s the key data (where 50 = the gap between expansion and contraction)

• Germany: 52.1 5-month high
• Italy: 49.7 26-month high
• France: 49.1 17-month high
• Spain: 48.6 25-month high

Rob Dobson, senior economist at Markit, said the data showed "a welcome return to growth for the Eurozone economy", boosting hopes that the recession will end this quarter.

Granted, the euro area has experienced false dawns before, but the improvements in confidence and other forward-looking indicators warrant at least some optimism for the outlook this time around. Germany posted a return to expansion in July, while the downturns in the other big-four economies all eased.

Dobson added that export demand had driven growth in the eurozone manufacturing sector, but there are also signs of recovery in domestic markets.

However…

The labour market remains the main bugbear of the eurozone, as rising joblessness hurts growth and raises political and social tensions.

9.01am BST

Signs of recovery in Europs

Back in the eurozone.. and Italy, Germany and France are all showing signs of recovery.

Activity in Italy’s service sector has hit a two year high in July, rising to 48.7 on Markit’s index — much stronger than June’s 45.8. Still a contraction, but at a much slower pace.

In France, the service sector posted its best reading in 11 months. Its July Services PMI of 48.6 was an improvement on June’s 47.2.

And, as predicted, Germany’s service sector leads the way – with a PMI of 51.3. That indicates growth in Europe’s largest economy for the third month in a row.

8.53am BST

Egypt stands out as the worst-performing of the major Middle East economies, with firms in both Saudi Arabia and the UAE reporting an increase in activity.

Updated at 8.53am BST

8.52am BST

Egypt’s private sector in dire situation

Grim confirmation that Egypt’s economy is contracting at an alarming rate.

Its private sector deteriorated sharply in July, with the headline PMI diving to 41.7, down from June’s 47.5. That’s a very sharp drop in activity. No surprise, given the political turmoil and violence that grips the country following the overthrow of Mohamed Morsi’s presidency at the start of July.

The number of people in work fell during July, and orders from overseas also dropped.

Simon Williams, chief economist for the Middle East at HSBC, warned that Egypt’s situation was perilous.

Political order is a prerequisite for recovery, but even if that is achieved, it will prove very challenging to quickly reverse the losses of the past 10 months.

8.35am BST

Graph: Spanish PMI vs GDP

And here’s a graph comparing Spain’s service sector PMI to its GDP — showing how the worst of its recession could be over…..

Updated at 8.37am BST

8.31am BST

Spain: Services downturn slows

The long slump in Spain’s service sector has eased, but firms are still suffering a drop in activity.

That’s the message from its Services PMI, which came in at 48.5, up from 47.8 in June. The best reading in nearly a year, but still a decline.

Markit, which compiled the data, said the decline in activity was slowing, suggesting Spain’s two-year recession could finally be over by Christmas:

Andrew Harker, senior economist at Markit and author of the report, commented;

The Spanish service sector came close to a change of momentum in July, with the rate of contraction in activity easing further during the month.

Should this current trend be built upon, we could be in line to see a return to growth of GDP by the end of the year.

This remains far from assured, however, with service providers continuing to highlight the effects of the economic crisis in their responses to the latest survey.
 
 
 

8.25am BST

Sweden roars back

Sweden’s service sector has roared back into growth, with a PMI of 56.6 – up from 44.8 in June.

Encouraging news for the Swedish economy, which suffered a rare (but small) contraction in the last three months (details).

8.19am BST

What we expect from Europe

This morning’s data is expected to show that Germany is the only eurozone member whose service sector is actually growing.

Michael Hewson of CMC Markets rounds up the predictions:

Of all the countries only Germany’s PMI is expected to show any form of expansion with a reading of 52.5 expected.

All the others are expected to show an improvement but are still expected to remain firmly stuck in contraction territory. Italy is expected to improve to 46.5, Spain 48.1 and France 48.3, while the broader European measure is expected to come in at 49.6.

Meanwhile, the UK service sector is expected to show stonking growth, with a PMI of at least 57, up from 56.9 in June.

Updated at 8.19am BST

8.10am BST

Service sector data adds to India’s gloom

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

It’s a big day for economic data, with a string of surveys showing how the world’s service sectors performed in July. And it’s already begun with alarming signs from two key economies – India and Russia.

The Indian service sector has shrunk for the first time since October 2011, driven by a drop in new orders and weaker economic activity. This means India’s private sector’s output has contracted for the first time in over four years, fuelling fears that its economy is on the slide.

This graph shows how India’s once-buoyant private sector has slipped in recent months:

The Indian service sector PMI tumbled to 47.9, down from 51.7 in June. Any number below 50 shows a fall in activity.

Leif Eskesen, chief economist for India at HSBC – which compiled the data – warned that manufacturing and services companies are both seeing a drop in new work.

Activity in the service sector contracted in July led by a drop in new business, which also led to a decline in optimism among the surveyed companies.

The slump in activity comes as the Reserve Bank of India (RBI) has battled to bolster the rupee, which has hit a series of record lows against the US dollar in recent weeks. Eskesen argued that the RBI will soon need to prioritise growth:

While the RBI has to cater to the currency at the moment, it will eventually need to cater more to growth as economic activity continues to soften.

The picture isn’t too much better in Russia either, where the private sector has suffered its first drop in activity in three years, and hit a four-year low.

The Markit/HSBC Services PMI, released this morning, fell marginally to 48.7 from 48.8 in June — meaning another month of falling activity.

This followed a similar drop in Russian manufacturing output last week, so Russia’s private sector PMI has now slipped to 48.7. That’s the first reading below 50 since August 2010, and the lowest since July 2009.

Russia has been hit by recent falls in commodity prices, which helped to push down privat sector employment.

Alexander Morozov, chief economist for Russia and CIS at HSBC, warned that Russia faces both cyclical and structural problems — with many firms declining to spend more on investment.

Like a duet of synchronised springboard divers, output in services and manufacturing dove in unison at identical rates in July, the HSBC Russia Composite PMI survey revealed.

Apparently, this kind of diving is not the one that can cheer anybody. In essence, it appears that the Russian economy has lost its growth engines, with neither manufacturing nor services being able to sustain overall economic growth alone anymore.

And here’s the obligatory graph:

A bad start to the morning. Can Europe do better? We get service sector from across the eurozone (9am BST), and from the UK (9.30 BST) this morning. Last week’s manufacturing data was encouragin, suggesting that the eurozone recession was over, and Britain’s recovery was gathering pace.

On top of all this economic data, I’ll be tracking the latest political developments across the eurozone area. Italy continues to be gripped by Silvio Bersluconi’s tax fraud conviction, while in Greece prime minister Antonis Samaras is preparing for a trip to America….

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The UK economy grows at a faster pace by 0.6% q/q in the second quarter of 2013. Construction up 0.9%, services up 0.6%. George Osborne’s view. The chancellor meets the night shift. Spanish jobless rate finally falls…

 


Powered by Guardian.co.ukThis article titled “UK economic growth accelerates to 0.6%, as IMF issues eurocrisis warning – as it happened” was written by Graeme Wearden, for theguardian.com on Thursday 25th July 2013 14.04 UTC

5.50pm BST

Closing summary

Chancellor of the Exchequer George Osborne meets staff at Tesco's National Distribution Centre near Rugby.
Chancellor of the Exchequer George Osborne meeting staff at Tesco’s National Distribution Centre near Rugby. Photograph: Stefan Rousseau/PA

Time to clock-off for another day. Here's a quick reminder of the key points…

Britain's economic recovery has picked up pace. Growth in the second quarter of 2013 has been estimated at 0.6%, twice as rapid as in the first three months of this year.

The Office for National Statistics reported that every section of the economy grew. However, the UK economy remains 3.3% smaller than before the financial crisis struck in 2008.

• Highlights start at 9.30am.

• Key charts from 10.02am

City economists were encouraged by the data, with some predicting stronger growth later this year. Business leaders, though, warned that more needs to be done to guarantee the recovery (see 10.30am onwards)

Chancellor George Osborne said the figures showed Britain is moving in the right direction. See 9.49am for details, and 1.12pm for video

There are also a few photos of Osborne meeting nightshift workers at 8.50am

Elsewhere…..

ª The International Monetary Fund warned that more needs to be done to nurse the eurozone back to health and avoid the crisis in the region flaring up again. See 3.03pm onwards.

• Greek MPs have approved legislation that should mean it receives its next aid tranche soon. See 4.25pm

Spanish unemployment has fallen for the first time in two years. However, the jobless rate shows that more than one in four adults are still out of work, and analysts warned that seasonal factors and migration were behind the change. See 4.58pm.

Back tomorrow for more live-blogging action, probably more centred on the eurozone after today's focus on the UK.

Until then, thanks and goodnight…. GW

5.47pm BST

Britain's improved economic growth didn't generate much cheer in the City, where shares ended lower – the FTSE 100 dropped 32 points to 6587.

More details here: Shire hits new record after update but FTSE 100 fades as rally runs out of steam

4.57pm BST

4.56pm BST

This morning's drop in Spanish unemployment has been welcomed by politicians and firms, although ministers admit that the jobless rate remain far too high:

Spain's unemployment rate fell for the first time in two years and some of the country's biggest firms said on Thursday business was looking up, boosting the government's claim the economy is climbing out of recession.

The dip in the jobless figures – to 26.3% in the second quarter from 27.2% in the first – nonetheless highlighted how far the country still needs to travel on the road to full recovery. Economy minister Luis de Guindos called the figures "totally unacceptable".

More here: Spain's unemployment rate falls

While this analysis piece from Open Europe is also worth a read:

Let's have a look beyond the (rather encouraging) headline figures on Spanish unemployment

It points out that the drop in unemployment can be attributed to seasonal factors, an increase in people dropping out of the labour market, and migration out of the country.

Spanish job rate
Photograph: Open Europe

Updated at 5.12pm BST

4.49pm BST

Across to Cyprus, and Open Europe flags up that deposits in its banking sector appear to have fallen again last month.

Cypriot deposit leakage continued in June

Cyprus bank deposits
Photograph: Open Europe

It's a slightly confusing picture, due to the ongoing restructuring of the Cypriot banking sector, but as Open Europe explains:

Ultimately, money continues to leak out despite the capital controls or people continue to rapidly wind down their savings. Neither presents a pleasant prognosis for the future of the Cypriot economy.

As we have said before the real test will come when the capital controls are finally removed, although that does not seem to be on the horizon in the near future.

4.45pm BST

IMF: round-up

The BBC has a good take on this afternoon's warning from the International Monetary Fund (see 3.03pm onwards):

IMF calls for further action to solve eurozone crisis

The International Monetary Fund has called for more action to end the crisis in the eurozone.

The IMF wants greater progress made on repairing the balance sheets of banks, so that lending can be kick-started

While the Daily Telegraph flags up that the IMF also worried that the eurozone could be hit when the US Federal Reserve starts slowing its stimulus package:

IMF fears Fed tapering could 'reignite' euro debt crisis

The report warned that the onset of a new tightening cycle in the US had already led to major spill-over effects in the eurozone, pushing up bond yields across the board.
Early tapering by the Fed "could lead to additional, and unhelpfu, pro-cyclical increases in borrowing costs within the euro area. This could further complicate the conduct of monetary policy and potentially damage area-wide demand and growth. Financial market stresses could also quickly reignite," it said.

4.25pm BST

Greek MPs approve civil service job cuts amendment

A woman makes a transaction at an ATM of a Piraeus Bank branch as a man waits for his turn in Athens July 25, 2013.
A Piraeus Bank branch in Athens today. Photograph: YORGOS KARAHALIS/REUTERS

The Greek parliament has approved an amendment to its legislation bringing in job cuts across the public sector, which paves the way to unlocking its next aid tranche worth €2.5bn.

The move means Greece will hit its target of transferring 4,200 workers into its new labour pool, where they could be forced to accept a new job or be laid off.

Greece's lenders had been concerned about certain 'exemptions' which meant some workers were able to avoid being transferred to the pool. Finance ministry insiders had said that this only affected around 80 people, mainly those with university quailfications or disabilities.

Kathimerini reports;

The legislation passed on Thursday overrides a law passed last week that protects civil servants with postgraduate degrees and those with disabilities or other social needs from being forced into a labor reserve, where they have eight months to find other jobs in the public sector or face dismissal.

Eurogroup finance ministers are now expected to approve the bailout payment on Friday. Yesterday, it said Greece had met 21 of the 22 pre-conditions on the aid tranche. Today's vote should complete the set.

Updated at 5.14pm BST

3.29pm BST

The IMF also pointed to the eurozone youth jobless crisis in today's assessment of the region, saying that despite recent progress….

growth remains elusive and high unemployment persists, especially among youth.

And while politicians such as Francois Hollande are talking positively about Europe's prospects (see 1.06pm), the IMF fears any deterioration in conditions could be serious. The eurozone, it said, has little slack to cope with new problems:

Because policy space is limited, public debt ratios are very high (and still rising), and economic slack is already substantial, further negative shocks—domestic or external shocks—could severely impact growth.

3.03pm BST

IMF issues eurozone crisis warning

The eurozone crisis isn't over, and the European Central Bank needs to take fresh action now to prevent the situation deteriorating.

That's the key message from the International Monetary Fund this afternoon, as it publishes its latet assessment of the eurozone areas.

The IMF predicted that austerity programmes being implemented across the region could wipe betwen 1% and 1.25% off annual growth this year, and recommended countries should slow down.

Fiscal adjustment should be paced to avoid an excessive drag on growth.

The IMF also called for the ECB to inject more liquidity into the financial system, though massive cheap loans to the banking sector. This would repeat the Long-Term Refinancing Operations (LTRO) conducted at the end of 2011 and early 2012, credited with staving off a more severe credit crunch.

The IMF said "additional unconventional monetary support" could help reverse the current situation where it is harder and more expensive for firms in Southern Europe to borrow than the North.

It said:

Taking its current approach forward, the ECB should ensure term funding needs for weak but solvent banks through an additional LTRO of sufficient tenor.

The eurozone's stronger banks have actually been repaying their existing LTRO loans, which the ECB sees as an encouraging development….

The headquarters of the European Central Bank (ECB) on January 8, 2013 in Frankfurt am Main.
The headquarters of the European Central Bank in Frankfurt. Photograph: Hannelore Foerster/Getty Images

Updated at 3.12pm BST

2.33pm BST

Greek gloom

Today's winds of economic optimism haven't reached Greece today, with two economic surveys showing that the country where the eurozone crisis began is still suffering.

Greek household disposable income has dropped by an alarming 6.2% year-on-year,, continuing a trend which began three years ago.

Disposable income in Greece, to Q1 2013
Disposable income levels (blue) and consumption spending (red) in Greece since the start of 2006. Photograph: l/ELSTAT

And Greek bank deposits have begun falling again, as consumers and companies dip into their reserves to keep afloat.

Data released by the Greek central bank showed a 0.5% drop in deposit levels to €162.65bn. Savings levels had been rising since last summer as confidence rose in Greece following the trauma of 2012, but that trend could be reversing….

Updated at 2.51pm BST

2.05pm BST

Alexander: Don’t get too excited

Danny Alexander
Photograph: Sky News

Danny Alexander, chief secretary to the Treasury, has been touring the media studios discussing today's growth data.

And the decent growth didn't prevent Alexander from taking a pop at the previous government, when asked about the situation on Radio 4's World At One:

Here's the quotes:

These figures are encouraging.

It's good news, not just that there's been growth but in every sector we have seen improvement.

But I'd also say we shouldn't get over-excited because this country has got a long way to go to not just to clear the financial mess that we inherited from the previous government but to rebuild our competitiveness and to make sure that we do have the conditions in this country for businesses to thrive.

He then scampered to repeat the message on Sky News, where business leaders were warning that the Treasury is failing to encourage and stimulate investment.

Alexander said he wasn't aware of a report that the UK languishes in 159th place when countries are ranked by investment as a share of GDP, but would look into it.

We're a helpful lot at Guardian Towers, so politely suggest the chief secretary checks out The Economist, who covered it here: Let’s try to catch up with Mali

1.12pm BST

Video: George Osborne on today’s data

Here's a video clip of George Osborne discussing today's economic growth figures, and Britain's passage "from rescue to recovery".

The chancellor says he is encouraged that all sectors of the economy grew in the last quarter (details at 9.43am onwards), and repeated the need to rebalance Britain away from the financial sector.

The clip also includes footage of Osborne touring factories and M6 motorway improvement work last night.

Updated at 1.49pm BST

1.06pm BST

Hollande: Eurozone recession probably over


French President Francois Hollande speaks during the “Brdo Process” leaders’ meeting at Brdo Castle, in Brdo Pri Kranju north of Ljubljana, on July 25, 2013. Photograph: BERTRAND GUAY/AFP/Getty Images

The UK isn't the only place enjoying better economic data this week. Over in Europe, the president of France has declared that the eurozone recession is probably over.

Speaking in Slovenia, Francois Hollande said:

Indicators published in the last few days look as if we have reason to believe we have overcome the recession, but it is still fragile.

Hollande may have been thinking of yesterday's survey of private sector firms in the euro area, which showed growth for the first time in 18 months.

He also said there was "no reason to sound the alarm" over Slovenia's banks, whose bad loan problems have led to speculation that the country may require a bailout.

Hollande is in Slovenia for a meeting of Balkan leaders to discuss integration into the European Union, and unresolved issues from the conflict of the 1990s.


The presidents of Albania Bujar Nishani, Croatia Ivo Josipovic, France Francois Hollande, Slovenia Borut Pahor and Kosovo Atifete Jahjaga pose for a group photo prior to the meeting “Brdo Process” at Brdo Castle, in Brdo Pri Kranju today. Photograph: BERTRAND GUAY/AFP/Getty Images

12.40pm BST

11.58am BST

Larry Elliott: GDP growth is no great shakes

Our economics editor, Larry Elliott, argues that today's GDP data is "tinged with disappointment", as the UK has bounced back more Tiggerishly after previous slumps.

Larry writes:

Compared to its miserable performance over the past few years, 0.6% growth looks impressive. But in the longer term it is no great shakes. Historically, the economy has grown by around 2.25%-2.5% a year on average, so the second quarter was smack in line with that trend.

But after recessions, national output has tended to rise strongly as it makes up for the ground lost during the downturn. Given that the level of GDP is still 3.3% below its previous peak, quarterly growth rates of 1% would be more normal for this stage of the cycle. The year-on-year growth rate of 1.4% is also below par.

More here: George Osborne's 0.6% growth is good but unspectacular

Updated at 12.09pm BST

11.35am BST

Key event

The news that UK growth is accelerating will "shape the national conversation" about the economy, reckons Nick Robinson, the BBC's Politics editor.

But with real wages lagging well behind inflation, attention may shift from headline growth to living standards.

Robinson writes:

There'll be no more talk of dips – double let alone treble – as people speak of recovery and not recession.

That will have an impact on political psychology – giving Tory MPs another reason to smile on their sun loungers this summer and allowing George Osborne to believe that he has finally put that "omnishambles" Budget behind him.

However, Ed Balls and Labour will be quick to remind us that a recovery in one measure of national economic output is not the same as a recovery in living standards. Average real incomes fell by 3% last year and the independent Institute for Fiscal Studies believes they will fall again as wages are squeezed, benefits and tax credits cut and inflation increases.

The politics of 'growth versus austerity' will slowly transform into the politics of who will improve 'living standards for all'.

Duncan Weldon, the TUC's senior policy officer, makes a similar point:

The latest data shows that take-home pay is only up by around 1% year-on-year, while the retail prices index of inflation is running at 3.3%.

11.28am BST

11.25am BST

Britain is finally getting back on its feet, reckons Nida Ali, economic advisor to the EY ITEM Club, but issues such as youth unemployment must be addressed. 

The headline GDP figures were bang in line with expectations, driven by private sector expansion, signalling underlying momentum in the economy. This is very encouraging and qualifies as the right kind of growth that we have been lacking over the past couple of years.

Ali predicts that Britain will achieve growth of "more than 1% this year".

Although the consumer sector will probably play a major role in the recovery, we also expect momentum to build in business investment and exports, which should give way to stronger growth of over 2% in 2014. But with a number of weak areas in the economy, such as high youth unemployment, disappointing wage growth and low productivity, we still have a long way to go.

Updated at 11.29am BST

11.18am BST

Today's preliminary estimate of 0.6% growth is only the ONS's first stab at calculating GDP in the last quarter, as it's only based on data from April and May.

It may well be revised in the weeks ahead, as Ben Chu of the Independent flags up:

11.12am BST

BCC: UK firms are more upbeat

Plenty of optimism over at the British Chambers of Commerce, which represents UK companies.

John Longworth, the BCC's director general, reckons business confidence is rising, with many bosses planning to hire more staff later this year.

Firms are feeling upbeat and are capable of expanding. More and more are adopting a ‘have a go’ attitude when it comes to exporting, which is really encouraging as this will go a long way to driving growth further still.

But strong, sustained growth requires efforts from the government too, as businesses need an enterprise-friendly environment for the economic to go from good to great. New and existing exporters need more support to help them diversify into fast-growing markets, and access to finance for dynamic, growing businesses must be made more available.

10.58am BST

IoD: Headwinds and tailwinds

The Institute of Directors predicts that UK growth could pick up pace in the current quarter, but warns that inflation and the eurozone crisis could scupper the recovery.

Graeme Leach, the IoD's chief economist, commented:

The GDP figures are encouraging and will help to further build business and consumer confidence. For the first time since the financial crisis the economy looks and feels as if there is a tailwind behind it. We are optimistic that the current rate of quarterly growth can be maintained through the second half of 2013 and into 2014. Indeed, if one looks to the current broad money supply (the amount of cash and bank deposits) as a leading indicator of economic activity, quarterly growth might actually accelerate slightly over the next 6 months.

Second quarter GDP growth of 0.6% is in line with trend growth but not above it. Consequently there is little reason to expect an imminent change in monetary policy by the MPC. The figures won’t have changed views on the size of the output gap and the amount of spare capacity in the economy. The MPC will also be aware that despite the tailwind to growth from the money supply, significant headwinds remain. Key headwinds include the squeeze on household income from inflation running ahead of earnings, bank balance sheet reduction and the ever present threat of a return of the euro crisis.

10.52am BST

David Cameron tweets that today's data shows Britain is moving in the right direction:

Surely it's the hardworking people who are building the economy, prime minister?

10.47am BST

BNP Paribas: well balanced growth

David Tinsley of BNP Paribas says today's data shows "relatively well balanced growth" in the last three months:

Within services, distribution, hotels and restaurants rose a very solid 1.5%. That was the stand-out area of strength, most other sub-sectors averaged around 0.5/0.6%.

Overall this is a decent but not spectacular performance for the UK economy. The level of output remains 3.3% below its previous peak, which highlights there is still much work to do.

10.30am BST

Reaction (1)

Here's a round-up of the best comment and reaction from economists and City experts on Twitter:

Updated at 10.30am BST

10.23am BST

Balls: It’s still a slow recovery

Ed Balls, shadow chancellor, has responded to the news that Britain's recovery picked up speed last quarter:

After three wasted and damaging years of flatlining, this economic growth is both welcome and long overdue. But families on middle and low incomes are still not seeing any recovery in their living standards. While millionaires have been given a huge tax cut, for everyone else life is getting harder with prices still rising much faster than wages.

“This is also the slowest recovery for over 100 years. In America, where President Obama has acted to support rather than strangle the recovery, their economy has grown nearly three times faster than the UK since autumn 2010. Simply to catch up all the ground we have lost under David Cameron and George Osborne we would need growth of 1.3 per cent each quarter over the next two years.

Real risks remain. So instead of more complacency from the Chancellor, we need action to catch up all the lost ground and secure a strong and sustained recovery that everybody can benefit from.

10.10am BST

My colleague Heather Stewart writes:

Britain's recovery picked up pace in the second quarter, official figures have confirmed, with GDP expanding by 0.6%.

George Osborne, the chancellor, welcomed the fresh evidence that the economy has moved, as he has put it, "out of intensive care".

"Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend," he said, "but there is still a long way to go and I know things are still tough for families.

More here: UK GDP growth of 0.6% shows 'Britain is on the mend,' says George Osborne

10.07am BST

Chart: Service sector lead the way

As suspected, most of the growth in the last three months has come from the service sector:

UK GDP by sector
Photograph: ONS

This reflects the fact that services still makes up around three-quarters of the overall economy.

A recap on the individual growth rates:

• Services: +0.6%

• Production: +0.6%, including +0.4% for manufacturing

• Construction: +0.9%

• Agriculture: +1.1%

10.02am BST

Chart: GDP over the last decade

Chief statistician Joe Grice made the point earlier that UK GDP is still 3.3% below its alltime peak in 2008.

This chart shows why — a massive tumble in output when the financail crisis struck, followed by patchy growth from the start of 2010.

UK GDP
Photograph: ONS

9.49am BST

Osborne: We’re holding our nerve

Chancellor George Osborne, doubtless invigorated by his adventures last night (photos), has welcomed the GDP data.

Osborne said:

Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend – but there is still a long way to go and I know things are still tough for families.

So I will not let up in my determination to make sure we put right all that went wrong in our economy.

Unlike the unbalanced economy before the crisis, we are going to make sure that everyone benefits from this recovery.

9.46am BST

And on a year-on-year basis, UK GDP is 1.4% higher than after the second quarter of last year.

However, we need to be cautious — as Q2 2012 contained an extra bank holiday for the Queen’s Diamond Jubilee, hitting output.

9.43am BST

Firing on all cylinders

All four main industrial groupings within the UK economy – agriculture, production, construction and services – grew in the second quarter of 2013. That means the economy is firing on 'all cylinders', in City jargon.

9.39am BST

Download the report

You can see the the data yourself on the Office for National Statistics website, here: Gross Domestic Product Preliminary Estimate, Q2 2013

9.38am BST

Good news, but nothing special

Britain's growth of 0.6% over the last three months is in line with City forecasts. It's twice as strong as the 0.3% rise in GDP recorded in the first three months, and is likely to cheer the government.

Our economics editor, Larry Elliott, comments that it's "good but unspectacular". If it continued over a whole year then it would mean annual growth of just under 2.5% — which would have been unspectacular in ther years before the financial crisis struck.

9.35am BST

Key event

UK GDP. Q2 2013
Photograph: ONS

9.33am BST

Questions – why has the construction sector grown so well, 0.9%, in the last three months?

Joe Grice won't speculate, but agrees that it's a stronger performance for the industry after a difficult time.

9.31am BST

Joe Grice of the ONS explains that Britain's economy is still 3.3% below its pre-recession peak.

9.30am BST

UK GDP DATA RELEASED

BREAKING: Britain's economy grew by 0.6% in the second quarter of 2013. That's in line with estimates.

The service sector grew by 0.6%,

Manufacturing grew by 0.4%

Construction grew by 0.9%.

9.28am BST

Joe Grice, chief economist at the ONS
Photograph: BBC News 24

Tension is building as the Office for National Statistics prepares to announce its first estimate of GDP growth, in just a few moment time.

Joe Grice, the ONS's chief economist, is sat at the press conference in London ready to deliver the big news….

Updated at 2.35pm BST

9.13am BST

Just over 15 minutes to go until we get the first estimate of UK growth for the last three months….

A 0.6% rise in GDP (the consensus view in the City) would mean that the economy has expanded by 1.4% over the last year (unless previous data is revised). That's a lacklustre annual growth rate.

Kit Juckes of Societe Generale reckons it won't be enough to persuade the Bank of England to start tightening monetary policy:

Year-on year growth of 1.4% is only good when we comapre it to the recent past or to the Euro Zone. And bear in mnd, we saw quarters with 0.6 or 0.7% growth in both 2012 and 2011, but we also saw quarterly falls. This may be marginally better than stagnation but won't alter the prospect of super-easy money being in place for a super-long time.

8.50am BST

Photos: Osborne meets the night shift

Chancellor George Osborne prepared for this morning's GDP data by spending last night visiting some of Britain's army of night workers in and around Birmingham.

He visited a Warburton's bakery, met with construction workers toiling on the M6 motorway, and toured Tesco's National Distribution Centre near Rugby, apparently to learn about how the UK economy runs at night.

Chancellor of the Exchequer George Osborne meets staff at Warburtons Bakery in Wednesbury near Birmingham.
Upper crust? Osborne meets staff at Warburtons Bakery in Wednesbury near Birmingham. Photograph: Stefan Rousseau/PA
Chancellor of the Exchequer George Osborne meets workers  on a section of the M6 motorway near Birmingham where he saw a road management scheme being constructed whilst the road was closed
Photograph: Stefan Rousseau/PA
Chancellor of the Exchequer George Osborne meets staff at Tesco's National Distribution Centre near Rugby.
Tesco’s National Distribution Centre near Rugby. Photograph: Stefan Rousseau/PA

Updated at 8.52am BST

8.41am BST

Service sector leads the way?

Where is Britain's growth coming from? The UK government has made plenty of noise about creating the 'March of the Makers", but economists reckon that the dominant services sector is driving the recovery.

Marc Ostwald of Monument Securities predicts:

Retail spending is seen contributing just 0.1 ppt to today's report, and construction output has been sluggish, with Services presumably assumed to have done most of the 'heavy lifting'.

8.37am BST

Dr Gerard Lyons, economic adviser to Boris Johnson, the Mayor of London, cautions against getting too excited about today's UK GDP figures.

8.28am BST

Spanish jobless rate finally falls

There are signs of recovery in Spain, too, this morning.

Its unemployment rate has fallen for the first time since it entered recession almost two years ago, but remains alarmingly high. The jobless rate dropped to 26.3% in the second quarter of this year, from 27.2% in January-March.

The total number of people out of work dropped to 5.98m, from 6.20m, while the employment total increase by 149,000 to 16.8m.

The south of the country continues to suffer the greatest unemployment rates, as this image shows:

Updated at 8.34am BST

8.08am BST

UK growth figures awaited

Chancellor of the Exchequer George Osborne meets staff at Tesco's National Distribution Centre near Rugby.
Chancellor of the Exchequer, George Osborne, meeting staff at Tesco’s National Distribution Centre near Rugby on Wednesday. Photograph: Stefan Rousseau/PA

Good morning, and welcome to our coverage of the latest events across the eurozone, the financial markets and the global economy.

Are things looking up for the British economy? We'll find out this morning, when growth figures for the second quarter of 2013 are released.

City economists expect to see a rise in GDP, of perhaps 0.6%, which would be twice as strong as the growth in the first three months of this year, when Britain avoided falling back into recession.

That would be welcome news to a country that's suffered weak growth, or worse, over the last few years. A strong performance is certain to be hailed by the government as vindication for its economic strategy.

As the Guardian explains this morning:

The Treasury will try to maintain a cautious posture, but start to put the political squeeze on the shadow Treasury team by claiming its dire predictions of mass unemployment have been proved untrue.

The shadow chancellor, Ed Balls, in the US for talks with the Obama administration, has already prepared the ground for the change of economic gear by highlighting the continued squeeze on living standards.

The UK will be the first major economy to estimate growth for the April-June period. In GDP forecasting (as in sport), Britain typically beats most other countries so the data will be a handy – if perhaps inaccurate – guide to economic conditions:

A healthy rise in UK GDP could add to the optimism created yesterday by the latest survey of European firms, which suggested the eurozone may finally be leaving recession.

The GDP data is released by the Office for National Statistics at 9.30am BST sharp, followed by a press conference in London.

I'll be covering the news and reaction in the liveblog, along with other key developments in the UK, the eurozone, and beyond through the day.

Updated at 8.28am BST

guardian.co.uk © Guardian News & Media Limited 2010

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This week UK GDP figures are expected to show a healthy increase, but is this the sort of recovery that benefits everyone? Analysts predict a growth rate of around 0.6%, perhaps even 0.8%, representing a strengthening of the recovery…

 


Powered by Guardian.co.ukThis article titled “Britain sees signs of recovery, but who has been left behind?” was written by Heather Stewart and Katie Allen, for The Observer on Saturday 20th July 2013 23.00 UTC

Row upon row of Range Rovers and Minis gleam in the afternoon sun in the yards around Southampton docks, waiting to be driven on to huge cargo ships that will carry them to car-hungry emerging economies.

From his office, port director Doug Morrison can see the towering cruise ships being loaded before they cast off for Mediterranean and Caribbean holidays. Alongside stands a ship awaiting a cargo of new cars, which arrive on the dockside on dedicated trains from manufacturers in the Midlands. Further along are container ships bringing TVs and clothes from the far east and a vast array of goods to stock Britain's shops.

"Two years ago there were 500,000 imports and exports of new cars here. This year it is 750,000 and I am pleased to say 65% of that is exports. They are from Jaguar Land Rover, Honda and there are Mini Coopers. Much of that growth is coming from Jaguar Land Rover sales to the far east," says Morrison.

This picture of a thriving British export sector is exactly the one the coalition will be hoping to project on Thursday, if, as experts expect, the latest GDP figures show the economy expanded at a healthy clip in the second quarter of 2013.

Analysts predict a growth rate of around 0.6%, perhaps even 0.8%, which would represent a marked strengthening of the recovery – good news for a coalition keen to seize on signs that the economy has moved "out of intensive care", as chancellor George Osborne puts it.

"We have a great economic barometer here. We can really see what is happening," says Morrison, who has run the docks for Associated British Ports since 2005. He talks about the "three C's" – cars, cruises and containers – and all point to an upturn, albeit with choppy seas ahead. "The cruise business continues to be very strong," he says.

Famous in the past as the port from which Titanic set sail on its ill-fated maiden voyage, Southampton now sees 1.6 million passengers embark and disembark from cruise ships every year. Less than a decade ago only a third as many were passing through the port.

But Morrison adds that the number of containers being landed has not risen – the lack of growth in consumer imports evidence of tough times on Britain's high streets. "When you look at what the likes of Tesco and Argos are saying, it's not surprising that you are not seeing any real growth in containers."

It is not only at the dockside that things are looking up, four years on from the depths of the recession. Jan Ward, chief executive and founder of specialist metals distributor Corrotherm International, based on an industrial estate on the edge of the city, says she is "overwhelmed with work".

"These have been the best five years we have had," says Ward, who started the company in 1992. On the back of strong demand for the nickel alloy parts the company supplies to the oil and gas industry, turnover grew 46% over the last year to £21m and Ward expects it to double this year. Corrotherm has recently opened offices in Abu Dhabi, Saudi Arabia, Korea and Perth in Australia and is about to open one in China.

Ward, an active member of the local chamber of commerce, believes the government's push for what the chancellor has called a "march of the makers" is finally starting to yield results. "All the signs that I see are very, very good. Finally, these messages are starting to get through to manufacturers and people who are looking to start businesses up. For the manufacturing sector things are looking very bright."

Despite her optimism, however, some economists are concerned that while a stronger GDP reading would undoubtedly be good news, there is so far little sign of the deep-seated shifts in the economy the government had hoped to bring about. Russell Jones of Llewellyn Consulting says: "It looks like what is driving this is the consumer to a large degree, and you could argue that that's the wrong sort of growth."

The housing market is starting to recover and retail spending is on the rise, but business investment in the first quarter of 2013 was more than 16% lower than a year earlier. Meanwhile the latest trade figures suggested that although exports are rising, so are imports, so that hopes of Britain becoming a new manufacturing powerhouse have so far proved over-optimistic.

Simon Wells, UK economist at HSBC, says: "Back in 2010, we were hoping the economy would rebalance in three ways: away from services and towards manufacturing; away from consumption and towards investment; and away from domestic demand and towards exports. Now it seems that for policymakers, any growth will do."

The Bank of England and the Treasury had expected the sharp depreciation in sterling since 2008 to spark an export revival, as British goods became cheaper on world markets. But the transformation has been hampered, both because our major markets have been in crisis and our industrial sector is so hollowed out that an increase in exports brings in its wake a jump in imports too, as manufacturers buy raw materials and parts.

At the same time, the decline in the pound has been one cause of the above-target inflation that has further hampered recovery by eating into workers' pay. Jones points out that with real incomes continuing to fall, in what the TUC has described as the longest squeeze on wages since the late 19th century, any rise in consumption is being driven by "people dipping into their savings".

There is certainly evidence in Southampton that the long-stalled property market is beginning to revive. Lisa Martin-Pope, who works in one of the many estate agents on the city's busy London Road, says: "The biggest indicator at the moment is we are seeing more first-time buyers and seeing banks and building societies lending to them more readily." Her agency, Martin & Co, is seeing homes selling more quickly, with the average buyer paying 93% of the asking price.

Labour will argue on Thursday that the benefits of the nascent upturn have been pocketed by a limited number of people, including those in financial services. Chris Leslie, shadow financial secretary to the Treasury, says: "Wages after inflation are now down by an average of £1,300 since David Cameron got into Downing Street, yet bank bonuses soared to £4bn in April as high earners took full advantage of the top-rate tax cut."

From his window on the docks, Doug Morrison agrees that not everyone is reaping the rewards of recovery. "The haves continue to spend and the have-nots cannot spend," he says. "People are reluctant to give up their holidays, the haves are still buying cars, but the poor people out of work or not getting any pay rises are not buying their three-piece suites or buying new clothes as often."

The haves are certainly in evidence at Southampton's Ocean Village marina, where shining white yachts are moored alongside motorboats. Luxury apartments overlook the water and in harbourside bars people sit around tables with glasses of chilled rosé and beer.

The only thing to spoil the idyllic summer scene is the sound of the jackhammers on the nearby construction site where a £74m, 24-storey apartment block will become Southampton's tallest building. James King, of local boat and home broker Waterside Properties, says there is a "cautious recovery".

But a short drive away from the marina, at Ford's soon-to-be-defunct Transit van plant, there's a powerful sense that not everyone is sharing in what Osborne calls the "healing" of recession-scarred Britain.

Engineer Chris finds it hard to conceal his dismay at losing the job he has had for 28 years. "It is devastating really. It's the end of an era. Anyone who has been here a long time is faced with a very empty shell of a plant. It is like a ghost town."

Chris, 52, who preferred not to give his full name, is moving to a new job with Ford in Wales, but not all his colleagues have been so fortunate, he says. "There's a lot of youngsters that have young families. We are closely knit."

When the factory is mothballed on Friday it will mark the end of more than a century of Ford vehicle manufacturing in the UK and more than 40 years of making Transit vans in Southampton. Faced with a prolonged slump in demand across western Europe that has seen new vehicle sales drop to a 20-year low, Ford is moving much of its production to a cheaper base in Turkey.

"The atmosphere in there is one of shock and disbelief. People are walking around as if they don't know what's happened. People in there I've known for years, grown men, they have been in tears," says Chris.

It remains to be seen if the long-hoped-for recovery that seems to be taking root will blossom as the year goes on, perhaps bringing with it the greater confidence for firms, and new jobs and pay rises for their staff, that would help to spread its benefits. Until that happens, most analysts will continue to be sceptical. "I'm still quite cautious about growth," says Wells of HSBC. "There must be a limit to how much we can grow when real, post-inflation wages are falling."

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UK GDP rises by 0.3% exceeding estimates by analysts and avoiding triple-dip disaster. George Osborne: Britain is recovering. But it’s a bumpy recovery. US jobless claims fall by 16,000 to seasonally adjusted 339,000, pointing to slow improvement…



Powered by Guardian.co.ukThis article titled “Poor Spanish and French jobs data but UK economy returns to growth- as it happened” was written by Graeme Wearden and Nick Fletcher, for theguardian.com on Thursday 25th April 2013 13.18 UTC

5.17pm BST

Stock markets in Europe continue rally

European markets have closed on a – mainly – positive note once again. Analysts said the continuing downbeat data from the eurozone – including poor jobless figures from Spain and France – made it ever more likely the European Central Bank would cut interest rates, perhaps as soon as next week.

Looking at the wider picture, there were some reasonable US weekly jobless figures which helped sentiment. And better than expected UK GDP figures encouraged investors in London, even though the data seemed to suggest there would be no action by the Bank of England to stimulate the economy at its meeting next week. So here is the closing snapshot:

• The FTSE 100 finished 10.83 points higher at 6442.59, a 0.17% increase

• Germany's Dax added 0.95% to 7832.86

• France's Cac closed 2.47% lower as the jobless total rose

• Italy's FTSE MIB ended up 0.52%

• Spain's Ibex dipped 0.29%

In the US, the Dow Jones Industrial Average is currently 0.48% higher.

And with that, it's time to close up for the evening. We'll be back tomorrow, so thanks for all your comments and see you then.

5.16pm BST

Italy's centre right party has been making positive noises after a meeting with new prime minister Enrico Letta.

According to Reuters, the party said Letta was open to its economic priorities and there wil be further talks to resolve outstanding issues.

And here's a poll showing the country's split:

5.05pm BST

French jobless figures hit new high

French unemployment figures are out and it's not good.

The number of jobless hit an all time high in March, rising by 1.2% to 3.225m. This is the 23rd monthly rise in a row, and means it has reached the worst level since records began in January 1996.

This is more bad news for president Francois Hollande, whose approval ratings are already at a low. They come despite the president's attempts to promote youth job schemes and allow flexible hiring and firing.

4.59pm BST

Cyprus sets date for vote on bailout package

Cyprus has set a date for the its parliament to vote on the island's EU-IMF sponsored rescue programme, reports Helena Smith. She writes:

Cypriot officials are now saying that the bailout package will be put to a make-or-break vote next week and "probably on Tuesday." The ballot has thrown fresh uncertainty around the rescue programme amid speculation that it may not muster the required majority in the 56-seat House.

Well-briefed insiders say the possibility of the island exiting the euro zone has grown dramatically in recent weeks with many among its business elite backing the idea "as the best way out of the crisis."

Meanwhile, the National Federation of Cypriots in the UK are increasingly speaking out against the unfair treatment that Cyprus has received at the hands of the EU and IMF.

"The troika has extracted its pound of flesh in Cyprus and has made the island pay dearly for the eurozone’s policy failures in Greece and elsewhere. Alternative solutions, including re-capitalisation of the two main Cypriot banks and their effective ‘nationalisation’ by the European Central Bank, were not given the time of day," Peter Droussiotis, who heads the federation, told an audience at the Palace of Westeminster last night.

 "Such measured solutions, which could have been further calibrated by a more managed contraction of the banking sector, over a transitional period, were set aside with the result that Cyprus’s economy has now suffered a devastating blow,” he said at a dinner attended by the island's foreign minister and leading British MPs.

4.32pm BST

Still with Germany, the country has raised its growth forecast for the current year from 0.4% to 0.5%, with 1.6% expected in 2014.

4.06pm BST

Merkel says ECB would raise rates if looking at Germany alone

There have been some (perhaps unguarded, perhaps not) comments from German chancellor Angela Merkel about European Central Bank interest rates.

As has become apparent in recent days, the markets have become increasingly convinced the ECB will cut rates at its meeting next week. Disappointing economic figures, not least from Germany itself, in the last few days have only reinforced that view.

But speaking at a savings banking conference Merkel said, in what observers said were unusually outspoken comments, that the ECB would have to raise rates if it were looking at Germany alone. In what could be seen as an acknowledgement that the one size fits all approach to completely divergent economies within the eurozone was flawed, she said (courtesy Reuters):

The ECB is in a difficult position. For Germany it would actually have to raise rates slightly at the moment, but for other countries it would have to do even more for more liquidity to be made available.

Meanwhile Investec poured a smidgeon of cold water on the hopes of a rate cut by the ECB next week. The broker's Victoria Clarke said:

The ECB meets in Bratislava next week with its next monetary policy announcement due at 12.45pm on Thursday and President Draghi’s press conference following at 1.30pm. We judge that the ECB is on the verge of reducing the main refinancing rate either in May or June, but on balance we suspect that move is more likely to come at the June meeting. Hence, whilst a very close call, we see the ECB maintaining the refi rate at 0.75%, the deposit rate at zero and the marginal lending rate at 1.5%.

Chancellor Angela Merkel at a savings bank conference. Photograph: Reuters/Fabrizio Bensch
Chancellor Angela Merkel at a savings bank conference – With the people, for the People. Photograph: Reuters/Fabrizio Bensch

Updated at 4.30pm BST

3.39pm BST

IMF official calls for Europe to boost growth

The IMF has said Europe must strengthen its growth prospects, otherwise it could fall into long term stagnation.

In a speech in London (apologies for being a bit UK-centric today) David Lipton said:

There is…a risk Europe could fall into stagnation, which would have very serious implications for households, companies, banks and other bedrock institutions.

So, to decisiveliy avoid that dangerous downside, policymakers must act now to strengthen the prospects for growth.

And the austerity versus growth debate goes on…

IMF members Christine Lagarde, Tharman Shanmugaratnam and David Lipton (left). Photograph: Stephen Jaffe/Getty Images
IMF members Christine Lagarde, Tharman Shanmugaratnam and David Lipton (left). Photograph: Stephen Jaffe/Getty Images

2.18pm BST

Video: Britain dodges the triple-dip recession

Here's a video clip of this morning's GDP announcement:

And leaving you with that, I am handing over to my colleague Nick Fletcher.

Updated at 3.55pm BST

2.13pm BST

Key event

There's encouraging economic data to report in the US as well — the number of people signing on for jobless benefit fall by 16,000 last week.

At 339,000, the initial jobless claims was the second-lowest reading since the financial crisis began.

2.11pm BST

Brian Reading of Lombard Street isn't getting carried away by today's GDP data:

Near stagnation for the rest of this year would validate the OBR’s 0.6% year-on-year growth forecast. A belly-dancer’s belly-wobbles don’t show whether she is gaining or losing weight. Too much attention is paid to first estimates.

2.07pm BST

It’s time for a late lunchtime round-up:

Britain has returned to growth and avoided a triple-dip recession, with its economy expanded by 0.3% in the first quarter of the year.

Chancellor George Osborne hailed today's GDP data as a sign that the UK is recovering (see his statement here). But Labour's Ed Balls argued that Britain still "urgently" needed a new fiscal plan (see 11.01am).

As my colleague Heather Stewart explains:

The key services sector expanded by 0.6% on the quarter, according to the ONS, while industrial production also grew, by 0.2% – though much of that was accounted for by North Sea output. The struggling construction sector declined by 2.5%.

• Heather's news story is here: UK avoids triple-dip recession with better-than-expected 0.3% GDP growth

Joe Grice, the chief economist of the ONS, told reporters that Britain was experiencing a bumpy and shallow recovery (see press conference highlights from 9.34am onwards)

• Business leaders have welcomed the news that the UK is growing (see 11.30am).

• But with the UK still 2.6% smaller than at its peak in 2008, there's no reason to rejoice (see Larry Elliott's analysis). Britain's recovery from the shock of the financial crisis remains slower than in the 1930s (see graph here).

• The news is likely to strengthen George Osborne's hand ahead of the arrival of International Monetary Fund officials next week (see here).

• In the City, the pound has rallied against the US dollar – up two cents this afternoon at .546.

UK GDP
UK GDP, on a quarterly basis, since the start of 2008

1.55pm BST

Stephen Lewis, chief economist at Monument Securities, argues that politicians should focus on making serious structural changes to the UK economy rather than scrapping over the pace of fiscal cutbacks.

In a research note Lewis also suggsts that Britain's economy is not faring too badly given the damage suffered by its financial sector when the crisis began:

It can hardly be doubted that the UK economy was among those suffering the most severe structural damage in the crisis, given its over-reliance on financial services. It would have been a reasonable expectation in 2009 that the UK would take longer than many other advanced economies to pull out of economic depression and that, while in depression, its GDP trajectory would be weaker than most other nations'. In the event, the UK's economy has lagged the performance of those with sounder structures, such as Germany and the USA.

On the other hand, it has been performing a good deal better than the economies of Spain and Italy, where the structural problems were less obvious in 2009. When viewed in this broad perspective, it makes little sense to argue that the UK is suffering peculiarly strong headwinds on account of the strategy Mr Osborne has chosen to follow. If it were, its GDP might be contracting at a 2-3% annual rate, which is the fate of several other European economies at the moment.

This is not to say that the UK's growth outlook might not be even stronger than it currently appears but action that addresses structural weaknesses is likely to be more effective than tweaking macroeconomic policies.

To fashion measures that strengthen the economy's structure is more of a challenge to politicians than to argue over macroeconomic settings. That may be one reason why comparatively little progress has been made towards structural reform.

1.26pm BST

Over on Comment is Free, Will Hutton is making the case for the government to push through structural reforms and create a new bad bank, rather than take comfort in today's data.

It's here: Don't be fooled by the GDP figures – Britain needs to change course

Here's a flavour:

Osborne has never looked economic reality squarely in the eye – that in 2008 Britain suffered a massive credit crunch, disabling its banking sector and exposing a vast legacy of private debt in an economy which had grossly over-invested in property, construction and financial services. Economies after such shocks and with such grievous imbalances need a prolonged period of convalescence. It is imperative, knowing that the private sector must retrench, that the public sector does all it can to compensate.

Over the past three years, Osborne has stubbornly done the opposite, blindly believing in the private sector's magical properties which the state can only impair. He has stood back, attempting to slash the deficit and generally disengaging. Events have forced him to moderate his position, with the beginnings of an industrial policy along with bank reform, but it has been too little, too late and with too little conviction. The pity is that today's news will reinforce his position, easing the political pressure for change.

1.11pm BST

Two years ago, George Osborne pledged to deliver "A Britain carried aloft by the march of the makers" in his March 2011 budget.

Today's GDP data, though, show that it's the services sector (+0.6%) which is delivering most of the growth rather than industry (+0.2% — mainly due to higher oil production), while manufacturing declined by 0.3%.

That doesn't suggest that the much-discussed rebalancing of the UK economy is completed.

Richard Barley of the Wall Street Journal warns:

The big picture is still one of an economy that is only creeping forwards: GDP is still 2.6% below 2008's peak and has risen just 0.4% over the past 18 months. With global economic data showing signs of a slowdown, it isn't clear the first quarter's expansion is sustainable.

Meanwhile, there is precious little sign of the rebalancing of the U.K. economy that policy makers like Bank of England Governor Mervyn King say is necessary: all of the growth in the first quarter was in the services sector, up 0.6%, while manufacturing contracted 0.3%. But the City still appears to be in the doldrums: business services and finance increased just 0.2% in the quarter.

12.44pm BST

Today's rise in GDP comes as economists warn that inflation in the UK could rise over the 3% mark again this summer.

Jeremy Cook, chief economist at World First, told BBC News that inflationary pressures mean it is vital that the UK economy keeps growing so workers can push for pay rises (inflation is currently 2.8%, while wages are rising at just 1%)

Cook explained:

If we start to see profits in manufacturing and construction, which were poor in this quarter, come alongside what the services sector is doing then members of those sectors can go to their companies, ask for wage increases, probably get them.

And therefore the cost of living for you and me become a little bit more favourable.

12.15pm BST

Osborne: it’s not an easy recovery

George Osborne, April 25th
Photograph: Sky News

Sky News just broadcast an interview with George Osborne in which the chancellor was cautiously upbeat about the UK economy following today's GDP data.

Osborne said:

It is not as easy a path out of recovery as anyone would have hoped a few years ago.

But added that Brritain has "won credibility around the world" for the way it has handled the crisis.

Osborne appeared relaxed about the prospect of next month's IMF visit. He argued that the pace of UK fiscal consolidation, or "the pace opf the cuts if you like" as he put it, is appropriate and consistent with the IMF's own guidance.

The chancellor added that manufacturing exports are growing slower than he'd like — which he partly blamed on the weakness on key markets in Europe.

12.07pm BST

The deputy prime minister, Nick Clegg, has taken a cautious view of today's GDP data:

Clegg said:

I don't want anyone to think that somehow we are out of the woods yet. We have still got a lot of work to do. The healing of the British economy is taking longer than we had anticipated and we will continue to work hard to make sure the country and the economy grow from strength to strength.

More here: Chancellor welcomes 0.3% economic growth, but Lib Dems are cautious

11.58am BST

Does the Osborne fightback start here?

Last week was pretty dire for George Osborne. It began with the International Monetary Fund suggesting his economic plan should be changed, and ended with MPs giving a scathing verdict on his new scheme to help first-time buyers (via a nasty rise in unemployment and Fitch downgrading Britain's AAA rating).

By the weekend, the chancellor appeared to be on the mat. But today's GDP data could be the moment that his fortunes change.

The IMF is due in London next week for a healthcheck on the UK economy — Osborne can now point to a growing economy — at a time when the eurozone remains stuck in recession.

It's even possible that the ONS will revise its historic data, and conclude that Britain did not contract between the fouth-quarter of 2011 and the second quarter of 2012. That would mean the dreaded double-dip never actually happened…

11.30am BST

GDP: the reaction

The general reaction to today's growth figures has been quite positive.

Graeme Leach, chief economist at the Institute of Directors, called it "good news just when we needed it".

John Cridland, CBI director general, argues that the UK now really needs "a recovery in manufacturing output, helped by a brighter global outlook":

And Rob Carnell of ING Bank called it "one in the eye" for the International Monetary Fund, after last week's criticism of the UK government from senior IMF staff.

There's a full, comprehensive round-up of reaction to today's GDP data, here: UK avoids triple-dip recession – full reaction

11.01am BST

Balls: Urgent action still needed

Ed Balls on UK GDP
Ed Balls on UK GDP Photograph: /BBC News

Ed Balls, shadow chancellor, has given a rather muted response to today's GDP data, repeating his call for the chancellor to adjust the pace of his fiscal plans.

Here's his full response:

These lacklustre figures show our economy is only just back to where it was six months ago and continue the picture of flatlining we have seen since the last spending review. David Cameron and George Osborne have now given us the slowest recovery for over 100 years.

This stagnation in our economy is the reason why people are worse off than when this government came to office. They took an economy that was starting to grow strongly, with falling unemployment and a falling deficit, and delivered stagnation, rising unemployment and £245 billion more borrowing than planned. The government’s economic policies have failed and Britain’s families and businesses continue to pay the price.

If we’re to have a strong and sustained recovery, and catch up all the ground we have lost over the last few years, we need urgent action to kickstart our economy and strengthen it for the long-term – as Labour and the IMF have warned. We need radical bank reform and a jobs and growth plan, including building thousands of affordable homes and a compulsory jobs guarantee for the long term unemployed. And instead of a tax cut for millionaires, we need a lower 10p starting rate of tax to ease the squeeze on millions of people on middle and low incomes.

The longer we continue to bump along the bottom the more long term damage will be done. Britain’s struggling families and businesses cannot afford another two years of this.”

Updated at 11.05am BST

10.54am BST

Slowest recovery since the Great Depression

This graph (from our Datablog) shows how the UK economy actually recovered faster after the Great Depression:

The Labour Party makes the same point, and tries to pin the blame on the prime minister.

10.42am BST

Alex Hern: UK is stagnating

In the New Statesman, Alex Hern is warning that "stagnation is still the name of the game" in the UK:

Our economic system is basically built around a paradigm of real economic growth in the two to three per cent range. We can handle short-term deviations from that norm, but the long-term trend must remain the same.

Growth much below that isn't growth at all; it's stagnation by another name. On top of that, real GDP growth isn't the only figure we heard today; we also know the growth per capita. And in a country with a rising population like ours, we need to be growing just for that to stand still.

As it is, GDP per capita fell by 0.3 per cent in the last quarter. The nation is getting richer, but its people are still getting poorer

More here: GDP grows by 0.3 per cent

And this graph from the ONS shows how GDP is stil below its 2008 peak:

UK GDP - main components, Q1 2013
Photograph: ONS

10.30am BST

Larry Elliott: It’s helpful for Osborne

Our economics editor Larry Elliott has analysed today's GDP data. He points out that while 0.3% growth is 'resonably solid' under the circumstances, but unspectacular by historic standards.

And it's enough to spare Osborne the 'disaster' of presiding over a triple-dip recession:

Larry writes:

The actual figure was reasonably solid. The service sector – which accounts for 75% of the economy – grew by 0.6% on the quarter, while a bounce back in North Sea oil output helped industrial production grow by 0.2%. Had it not been for the 2.5% quarterly drop in the still depressed construction sector, growth would have been around 0.5% in the first quarter, quite close to its long-term trend.

It is not all good news. Despite the growth in early 2013, the economy is still 2.6% below its peak in early 2008 when the recession began. And, as the Office for National Statistics noted, the economy is no bigger now than it was 18 months ago – a point Ed Balls will no doubt be making over the coming weeks and months.

But make no mistake, this number is helpful to Osborne, who was quick to say that there were encouraging signs that the economy is healing. Had Thursday's number been negative – even by just 0.1% – that claim would have been impossible to make.

More here: Unspectacular GDP data will take political heat off George Osborne

10.21am BST

Cable: it doesn’t feel like a recovery yet

Out in Brazil, business secretary Vince Cable has welcomed the news that Britain has avoided falling back into recession. But he also points to several weaknesses in the UK economy, including construction (which suffered that 2.5% contraction).

Here's Cable's full comment:

We've always said the road to recovery would be a marathon, not a sprint. 

Today's figures are modestly encouraging and taken alongside other indicators such as employment figures, suggest that things are going in the right direction.

However there is still a long way to go and some serious issues such as the systemic lack of bank lending to SMEs, the weakness in the construction sector and the need to press further on trade and exports, which I am doing now on my visit to Brazil.

These issues all need to be addressed before people feel like the economy is genuinely starting to recover.

10.17am BST

And here's what a bumpy, shallow recovery looks like (via the Guardian's Datablog)

UK GDP quarter-by-quarter
Photograph: Datablog

10.10am BST

ONS: Britain’s bumpy and shallow recovery

The ONS's chief economist Joe Grice said the 0.3 per cent growth registered from January to the end of March fitted the pattern in recent years.

"Today's figures seem to be not out of line with recent history of an upward trend, but one that is quite bumpy and shallow," he said.

The services sector growth of 0.6 per cent was "broadly based" and offset falls in manufacturing at the beginning of the year and a sharp fall in construction output.

But within the services sector, car sales were a major growth area after a spending surge in the first three months, said ONS statastician Rob Doody.

The services sector is now 0.7 per cent above its peak. However, manufacturing remains 10 per cent below the peak in 2008 and construction is 18 per cent below its peak, said Grice.

(via our economics correspondent, Phillip Inman)

10.06am BST

The full details of today's GDP data can be downloaded here:

Gross Domestic Product: Preliminary Estimate, Q1 2013 Release.

10.04am BST

My colleague Paul Owen is covering all the political news today, including the full reaction from Westminster to today's GDP data, here: Politics Live.

9.57am BST

Pound jumps, but FTSE doesn’t

The pound is rallying on the foreign exchange markets, up almost one-and-a-half cents against the US dollar at .514.

Shares are unmoved, though, as our market reporter Nick Fletcher reports:

The FTSE 100, down 15.85 points ahead of the GDP announcement, edged slightly higher before slipping back to the current 6414.56, down 17.20 points.

9.52am BST

Car sales and oil production fuel growth

Phillip Inman flags up that strong sales of motor vehicles, and a bounce-back in oil production, helped to push UK GDP up in Q1.

From the ONS press conference, he reports:

GDP was rescued by car sales, says the ONS, with the Motor trade element of the services sector showing the strongest growth…

A bounce back in North Sea production after a sharp decline in q4 2012 is also a big factor in the rise this quarter.

9.49am BST

Despite the welcome rise in UK GDP in the last three months, Britain's economy is still 2.6% smaller than its all-time peak in 2008 — shortly before the collapse of Lehman Brothers rocked the financial world and drove many countries into recession.

9.43am BST

Osborne: Britain is recovering

George Osborne has welcomed today's GDP data, arguing it shows that the government is making progress.

Here's the chancellor's statement in full:

Today’s figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress.

The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows.

We all know there are no easy answers to problems built up over many years, and I can’t promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future.

9.40am BST

ONS press conference
Photograph: Sky News

Joe Grice, the head of the ONS, is refusing to make any predictions for how the UK economy may fare in the months ahead.

9.37am BST

Service sector leads the way

Britain's dominant service sector has led the way, putting the UK back to growth and averting the triple-dip.The construction industry, though, continues to suffer an ongoing contraction.

Service sector grew by 0.6% in Q1

Construction sector shrank by 2.5%

Production industries: grew by 0.2%

9.34am BST

Key event

On a year-on-year basis, Britain's GDP is 0.6% larger than a year ago.

Joe Grice of the ONS is explaining that this adds to the picture of a slow, bumpy recovery over the last 12 and 18 months. He's talking about Britain's economy being on a plateau, but one on a slow, upwards trend.

Updated at 9.41am BST

9.31am BST

Triple dip avoided

This is good news for George Osborne, says our economics editor Larry Elliott:

It means the triple-dip fears have been averted – although Labour will say that the economy is back to where it was six months ago.

Updated at 9.32am BST

9.30am BST

UK GDP released – Britain avoids recession

UK GDP has grown by 0.3% in the first three months of this year.

That means Britain has avoided falling back into recession.

More to follow

9.25am BST

The GDP data will be announced at a press conferrence at 9.30am sharp in London. Our economics correspondent Phillip Inman is there.

The news is also released to the City at the same moment.

Updated at 9.25am BST

9.20am BST

Just 10 minutes to go until the Office for National Statistics releases its first estimate of UK GDP for the first quarter of 2013, and the predictions and caveats are flying:

A bit of excitement is OK, though

9.12am BST

Surveys of UK firms in recent weeks have suggested that conditions have improved a little in 2013. That's one reason that City economists, on balance, predict a small rise in GDP.

This graph shows 'composite PMI' (a measure of whether companies' output is growing) versus GDP.

GDP vs PMI, to April 2013
Photograph: ING

9.03am BST

Marc Ostwald of Monument Securities says it is 'at best facile' to fret too much about the triple dip right now, as this morning's data will probably be revised.

Ostwald also points out that the consensus forecast of +0.1% in the first quarter would mean Britain's GDP would have risen by +0.3% on a year-on-year basis.

That would actually be quite a good outcome, in light of a very long and arduous winter and its dampening effect on activity, not only in the UK, but across Europe, notwithstanding the other non-weather related headwinds blowing from the Eurozone.

Economist Andrew Lilico argues that it doesn't really matter whether today's data shows a small rise or a small fall.

And in the readers comments below, rafters points to the big picture:

Double dip, triple dip, quadruple dip, what does it matter?

We're just bumping along the bottom like an aircraft failing to take flight. All a short period of growth means is we'll shortly have another dip to add to the number.

8.51am BST

Spanish jobs data shows perils of austerity

Here's our Madrid correspondent Giles Tremlett's take on this morning's dire Spanish unemployment data (see 8.42am)

Is this where austerity gets you? Spain's unemployment rate reached 27 percent in the first quarter of this year, with more than six million unemployed for the first time ever.The figure of 6.2 million unemployed comes from the state statistics agency today. Spain's economy shrank 1.9 percent over the last year, though the speed of decline appeared to be slowing in the first quarter.

Mariano Rajoy's People's party (PP) government is due to introduce further cuts tomorrow. There are also rumours of further pension reform, with the retirement age for Spaniards apparently set to rise above 67. But a change of heart in Brussels will, according to reports in El Pais, see the deficit target softened considerably this year – raising it from 4.5 percent of GDP to six percent or above. Last year's deficit (excluding bank bailouts) was 7.1 percent.

Spain's jobless rate is also more than three times as high as the UK — where it hit 7.9% last week.

8.42am BST

George Osborne has often blamed the eurozone's debt crisis for causing some of Britain's economic ills, and the latest Spanish unemployment data (just released) certainly confirms the scale of the crisis in Europe.

The Spanish jobless rate hit 27.1% in the first quarter of 2013 – even worse than economists had expected. Spain is already deep in recession, and its GDP is expected to shrink by 1.6% this year.

Updated at 8.43am BST

8.34am BST

The bigger picture…

As many of you are pointing out in the comments below, the triple-dip question shouldn't distract from the fact that Britain's economy has been bumping along for a while.

On a quarterly basis GDP has risen, or fallen (see the chart at 7.34am) but the broad picture is of an economy stagnating for most of the last two years.

Also worth noting that we only get the preliminary estimate of GDP this morning – it will probably be revised.

8.25am BST

GDP predictions?

Any predictions for UK GDP today? If so, do post them in the comments below. (Full disclosure: I plumped for +0.2% in the office sweepstake).

8.14am BST

Calm in the City

The London stock market has opened, and shares and sterling have risen slightly in early trading.

FTSE 100: up 25 points at 6456, + 0.4%. That's a new three-week high.

The pound is also up nearly half a cent against the dollar, at .530.

The word in the City is that Britain will probably avoid a triple dip, but that the wider economic landscape remains troubled.

As Michael Hewson of CMC Markets put it:

The amount of growth to all intents and purposes is likely to be economically insignificant, but in a political context it is very important for the credibility of the government’s current policy, being the difference between a triple dip recession or not.

Updated at 8.14am BST

8.04am BST

What the economists are saying

We've rounded-up some of the City economist forecasts for GDP. here: Will Britain slide into a triple-dip recession?

Updated at 8.04am BST

7.59am BST

Bad weather could be key

Fears of a triple-dip recession have been fuelled by the grim winter weather which Britain suffered at the start of 2013. Heavy snowfall forced some factories to close, and also deterred many people from venturing onto the high street to spend.

As we wrote last month: Cold weather makes triple-dip recession more likely, economists fear

City analyst James Knightley reckons that the UK economy was flat in the first three months of 2013. A reading of 0% change to GDP would mean that the UK was not back in recession.

Knightley explains:

Today’s GDP numbers will tell us if the UK has returned to technical recession for the third time in 5 years.

Bad weather in January and March make this a close call.

7.34am BST

Has Britain suffered a triple-dip?

Good morning. Britain will learn today whether it has slumped into an unprecedented triple-dip recession when economic output data for the first quarter of 2013 is published.

The data, released at 9.30am by the Office for National Statistics, is eagerly awaited both in the City and in Westminster.

A negative GDP reading will plunge the UK economy into its third recession (defined as two consecutive quarters of negative growth), since the financial crisis began in 2008.

UK GDP since 2008
Photograph: Office for National Statistics

As well as a measure of the UK's economic strength, the latest GDP data is also a scorecard of George Osborne's performance.

The chancellor is already under pressure from the International Monetary Fund to relax the pace of his fiscal programme, and stinging from the loss of Britain's AAA rating with two credit rating agencies this year.

Many economists expect that Britain probably eked out a little growth at the start of this year. The City consensus is that UK GDP expanded by 0.1% between January and March. But some economists have predicted a negative reading, which would follow the 0.3% contraction in the last quarter of 2012.

Britain is also the first major country to report GDP data for the first quarter of 2013, so today's data could show how the global economy is faring.

Updated at 7.39am BST

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Whether economy has contracted for second quarter in row may be a trivial detail that distracts from bigger, more dismal picture. Forecasters are split over whether the UK economy managed to grow in the first quarter of this year or contracted again…

 


Powered by Guardian.co.ukThis article titled “Will Britain slide into a triple-dip recession?” was written by Katie Allen, for theguardian.com on Monday 22nd April 2013 11.52 UTC

The wait to find out if the UK slipped into a triple-dip recession is over this week, with official GDP data out on Thursday. Forecasters are split over whether the UK economy managed to eke out some growth in the first quarter of this year or contracted again.

The consensus forecast in a Reuters poll is for a tiny 0.1% quarter-on-quarter uptick. But predictions range from a 0.2% drop in GDP to growth of 0.3%.

The Office for National Statistics (ONS) said the economy slipped by 0.3% in the fourth quarter. Thursday will be statisticians' first take of three for the first quarter and economists caution that the numbers, as well as data for previous quarters, could well be revised either up or down.

But if the figures do show two successive quarters of contraction from the beginning of October to the end of March it will mark a triple-dip recession – unprecedented in living memory.

Still, many economists also warn that whether the UK officially slipped into a triple-dip or not is a trivial detail that distracts from the bigger picture of an economy facing headwinds from squeezed consumers, an austerity drive and struggling industry.

Here is a roundup of views ahead of Thursday's 9.30am figures.

Brian Hilliard, Société Générale

The first estimate of GDP is an output measure on two months' hard data for industrial production, construction output and services output available to the ONS together with forecasts for the third month. However, only one month's services data is published before the GDP release. That makes it rather difficult to make a sensible forecast, but here goes! Based on reasonable assumptions for March, Q1 growth in industrial production should be between 0% and 0.1% quarter-on-quarter. Construction output should fall by between 3% and 6% and services should rise by about 0.2% quarter-on-quarter. The weather will have been a dampening factor in construction output and unfortunately that weakness is likely to outweigh the growth in services. The result should be a fall in GDP of about 0.1% quarter-on-quarter. This will inevitably spawn "triple dip" headlines. The real story is modest underlying growth but not high enough to reduce the output gap.

Nick Bate, Bank of America Merrill Lynch

We think the preliminary estimate of Q1 GDP may show zero growth over the quarter. Indeed, we think the balance of risks may be skewed a little to the downside … Monthly data available suggests that output in both the industrial and services sectors may have risen a little over the quarter, but another notable fall in construction output may have knocked around 0.2 percentage points off GDP growth.

Vicky Redwood, Capital Economics

It is questionable whether it should be considered a "true" triple-dip … The 0.3% quarterly drop in real GDP in the fourth quarter (Q4) can probably be wholly accounted for by the reversal of the Olympics boost which supported output in the third quarter. Without the Olympics effect, output would probably have avoided a contraction. In any case, any triple dip might well be revised away in the future. The double dip between Q4 2011 and Q2 2012 was initially estimated to consist of three quarterly contractions in GDP of 0.2%, 0.2% and 0.7%. But the two 0.2% contractions are now estimated to be 0.1% drops. So it is already being called the double dip that almost didn't happen.

Nonetheless, we should not let the somewhat meaningless debate about the triple dip distract from the big picture – that this recovery is still depressingly dismal. To rub salt into the wound, the US Q1 GDP figures also released this week are set to show growth rising by 3.2% annualised (a quarterly rise of about 0.8%). This will leave the divergence between the two economies looking even more striking.

Howard Archer, IHS Global Insight

In reality, it makes very little difference whether the economy expanded modestly in the first quarter, contracted marginally or was flat. However, it would be good for psychological/confidence reasons if the economy could dodge contraction in the first quarter and, therefore, avoid nasty and potentially damaging headlines about "triple-dip recession".

We put the odds of GDP contraction in the first quarter (and hence a triple-dip recession) at around 30%. So we reckon there is a 70% chance that the economy was either flat or grew marginally.

We suspect that expansion in the dominant service sector was strong enough to allow the economy to eke out marginal GDP growth of 0.1 to 0.2% quarter-on-quarter in the first quarter. This would result in year-on-year GDP growth of 0.4% year-on-year. Admittedly, it looks like there was substantial contraction in construction output in the first quarter, but the sector only accounts for 6.8% of GDP, while the services sector accounts for 77%. Meanwhile, industrial production was likely essentially flat in the first quarter, given that there was a marked rebound in output in February from January's sharp drop.

Ruth Lea, economic adviser to Arbuthnot Banking Group

On the basis of ONS data so far available and survey material, GDP for 2013 Q1 could be a tad positive, thus avoiding a triple dip. But whether or not a triple dip is avoided, economic performance is weak. The latest labour market data showed an increase in unemployment, the February trade data deteriorated and bank lending to the business sector fell in February. The IMF downgraded its forecasts for the UK last week, with its chief economist, Olivier Blanchard, saying the chancellor should reconsider his "strict" austerity programme, and Fitch's downgraded Britain's triple-A rating to AA+.

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