Economists Round On 'Very Muted' And 'Disappointing' 0.6% GDP Growth

You Call This Growth?

Leading economists have poured cold water on news that the UK economy grew by 0.6% in the second quarter of 2013.

The figures released by the Office for National Statistics (ONS) represented the first time since 2011 that the UK has enjoyed successive quarterly growth, after a 0.3% rise at the start of this year.

"Today's economic growth figures are encouraging. We are on the right track - building an economy for hardworking people," said prime minister David Cameron.

However, the ONS warned that the UK was still lagging 3.3% behind its pre-recession peak, with manufacturing 10.2% below peak and construction 16.5% below.

Speaking to the Huffington Post UK, Samuel Tombs, UK economist at Capital Economics said: ““Expectations were pretty depressed about what growth could be this year.

“It’s still looking relatively disappointing compared to past recoveries.

“You should be seeing relatively strong growth rates as the spare capacity is put back into use and often in previous recoveries you’ve seen strong periods of catch up growth, maybe up to 1%, so we’re still quite a long way.”

Howard Archer, Chief UK economist at IHS Global Insight, said the latest growth figures were “very muted”.

“Normally when you’ve had as deep a recession as this, you’d expect the economy to come bouncing back quite a lot, and the fact is that it hasn’t,” he added.

The latest growth figures were met with disappointment by some traders in the City, with the value of the pound falling against the dollar in response to the news.

Jonathan Portes, director of the National Institute for Economic and Social Research (NIESR) and former Cabinet Office chief economist, said the coalition had more to do to ensure an economic recovery.

“A substantial period of sustained above trend growth will be required to close the 'output gap' and reduce unemployment back to where it should be - at least three-quarters of a million lower than current levels,” he told the Huffington Post UK.

Others focused on the issue that the nascent recovery might be failing to benefit all income groups. Labour's shadow chancellor Ed Balls, who has been pivoting away from arguments over growth in recent weeks, and onto the cost of living, said: “Families on middle and low incomes are still not seeing any recovery in their living standards.”

He added that the UK is experiencing "the slowest recovery for over 100 years": "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."

Blogging on the Huffington Post UK, shadow financial secretary Chris Leslie said: "For most people, life is getting harder as the cost of living rises. So while today's economic growth figures show a small rise in Britain's output - something which is both welcome and long-overdue - the sobering truth is that there has been no recovery yet for people on middle and low incomes."

Matthew Whittaker, senior economist at the Resolution Foundation, told the Huffington Post UK that the richest could still stand to benefit the most from the recovery.

“An important question in the next year and beyond will be how the benefits of any growth are shared. In some recent periods of growth, those at the very top took a large slice of the pie.

“For instance, between 1994 and 2011 the most affluent 1 per cent of working-age households in Britain took 13% of the proceeds of growth while the entire poorest half of the country took only 17 per cent. With households having been so squeezed in recent years—and many still struggling under the burden of debt repayments—it’s absolutely critical that any growth is broadly shared.”

By contrast, Graeme Leach, chief economist at the Institute of Directors, said: “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."

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