The end of double-dip recession

Britain is expected to confirm Thursday that its longest double-dip recession since the 1950s is over, but the return to growth remains clouded by fears about the economy’s underlying health.
The initial estimate for third-quarter gross domestic product (GDP) — the combined value of all goods and services produced in the economy — is to be published by the Office for National Statistics at 0830 GMT.
On the eve of the vital data, British Prime Minister David Cameron sparked a political row by declaring that “good news will keep coming” on the economy this week.
Opposition politicians claimed the remarks were a broad hint at Britain’s exit from recession because Cameron has advance access to the GDP figures.
Market expectations are that the economy in Britain, which is not part of the eurozone, will have expanded by 0.6 percent in the third quarter or July-September period, after falling into the second trough of a double-dip recession in late 2011.
However, commentators said growth was likely distorted by one-off factors, such as the London 2012 Olympic Games and rebounding activity after an extra public holiday for Queen Elizabeth II’s Diamond Jubilee.
The GDP figures “should show that output rebounded in the third quarter, taking the economy out of its double-dip recession,” said Capital Economics analyst Vicky Redwood.
“This would reflect the impact of an extra bank holiday in the second quarter and the boost from the Olympics.”
Britain escaped a deep downturn in late 2009 but fell back into recession at the end of 2011.
GDP contracted by 0.4 percent in the second quarter of this year after shrinking by 0.3 percent in the first — and by 0.4 percent in the final quarter of 2011.
Economists warn that the economy still faces considerable difficulties, not least from tight credit conditions and worries about an ongoing debt crisis in the eurozone, a key trading partner.
Other major headwinds include rising inflation on higher energy and food prices, the uncertain jobs market and ongoing austerity measures from Britain’s coalition government.
“The UK’s output figures for the third quarter of this year are expected to show an exit from technical recession,” agreed economist Rob Harbron at the Centre for Economics and Business Research consultancy.
“Growth will return to marginally positive territory, but with elevated unemployment, low business confidence and government austerity, economic conditions are expected to be fragile for some time.”
Upbeat retail sales numbers last week added to market belief that British growth had switched into positive territory.
British annual inflation slowed to almost a three-year low at 2.2 percent in September, recent official data showed.
Cameron, taking part in a weekly question-and-answer session on Wednesday, defended his handling of the economy and boasted of the recent favourable economic indicators.
He then told opposition Labour party leader Ed Miliband: “I can tell you, the good news will keep coming.”
Labour accused Cameron of making a “clear reference” to the eagerly-awaited data.
Cameron and other top-ranking ministers and officials are given 24 hours’ notice to the GDP figures, on condition that they are not disclosed.
However, the prime minister’s official spokesman denied that Cameron was talking about the GDP figures.
“He was basically saying we are on the right track, the government has the right policies and the economy is healing and rebalancing,” the spokesman said.
With inflation falling for now, the Bank of England has left the door open for more stimulus in the form of quantitative easing (QE).
The bank’s nine-strong Monetary Policy Committee (MPC) has underpinned the British economy by providing a total of £375 billion ($602 billion, 461 billion euros) in new money since March 2009.
Under QE, the central bank creates new cash which is used to purchase assets such as government and corporate bonds to increase lending by retail banks and boost economic activity.