Growth in the UK, but also uncertainty
Between April and June, GDP grew by 0.6% compared to the previous quarter, in which activity had increased by 0.3%, preventing the country from slipping back into recession. Year-on-year growth stands at 1.4%. Prime Minister David Cameron was said to find these figures "very encouraging."
The government find it increasingly pleasing that all four major sectors have contributed to this growth, which has not happened for three years. If services, which account for three quarters of the UK economy, played a major role (0.6% growth), agriculture, manufacturing and construction are all equally growing.
"This is good news because so far we have witnessed a very atypical recovery, with alternating positive and negative quarters," comments Yves Zlotowski, Chief economist at credit insurer Coface. He appreciates the wise balance found by the British authorities to encourage companies by reassuring them that: "the austerity measures introduced by the government combined with the expansionary monetary policy of the Bank of England supports the expectations of economic players.”
But if the growth is there, it remains fragile, especially as it is driven by domestic consumption, which in turn is driven by an improvement in credit availability credit, especially in property. "The biggest weakness of the British economy is the high levels of debt in the private sector," continues Yves Zlotowski. However, the on-going deleveraging is likely to weigh on the sustainability of this growth, while the failure of investment is still being felt. "The poor performance of the industrial sector is rather disappointing," notes Barclays Bank, which emphasizes the need to find a better balance in growth. And short-term, no good news should come from exports, weighed down by the crisis in the eurozone, the main trading partner of Britain. Hence the modest triumph of George Osborne, the finance minister, who said "there is still a long way to go."
Source - Coface press release