YESTERDAY’S provisional figure for GDP growth was a pleasant surprise, especially after all of last week’s anguish over government spending cuts.
At a rate of 0.8% for the third quarter, UK economic growth is powering ahead faster than many anticipated.
Many forecasters had pencilled in half that growth rate. Combined with the 1.2% enjoyed in the second quarter, the data suggests that annual growth will exceed official forecasts by a significant margin.
All of the growth is coming from the private sector, leading to the very real prospect that private sector job creation will be strong enough to offset the job losses expected in the public sector following the Comprehensive Spending Review.
Manufacturing, construction and business services have led the way by bouncing back from the last recession with some vigour, according to the detailed analysis provided by the Office for National Statistics.
Distribution, hotels and restaurants rose 0.6%.
Taken together, the second and third quarter GDP growth figures raise the question: Should we be so surprised? After all, prior to the recession, the UK economy was consistently very resilient, comfortably surviving many of the bumps along the way that caused serious problems in the US and western Europe. Our economists have yet to put their finger on the factors that move our economy.
But it’s worth being a little cautious. There are still some ambiguous signals. Consumer spending, house prices and business hiring intentions remain low. These figures, though, surely put to rest any lingering fears that the UK could slip back into a double-dip recession.
The Office for National Statistics said that, taking into account the poor weather that hit the UK at the start of the year – which deferred some activity into the second quarter and artificially boosted growth in that period – growth in the second and the third quarters was broadly similar. It implies Britain’s annual rate of growth is running in excess of 3%.
That, combined with this month’s higher than expected inflation figures, would seem to put pressure on the Bank of England’s Monetary Policy Committee to think about raising interest rates earlier than previously expected.
ONE industry sub-sector that seemed to withstand the recession better than most was the no-frills air travel.
Despite the doom and gloom affecting the rest of the economy, Ryanair and Easyjet kept adding to their fleet of planes and flight schedules.
But then, a few months ago, Ryanair announced it was returning 1bn euros to shareholders, instead of investing the money it had stored up on its balance sheet in 200 more new planes. Now EasyJet founder Stelios Haji-Ioannou has added to the sense of pending stasis in the no-frills market by saying that it would be hard to find new growth.
In a media interview, Mr Haji-Ioannou, still the company’s biggest shareholder, said Easyjet must rein in expansion plans and accept that growth in the discount airline industry has peaked.
He insisted the airline’s fleet should be frozen at about 200 planes, rather than the planned 315.
If Mr Haji-Iaonnou is right and the no-frills market has matured, it would suggest that Vancouver Airport Services got its timing wrong when earlier this year it bought Liverpool John Lennon Airport from Peel, who appear to have got the timing of their exit spot on.
This would be a pity, because JLA’s growth has made a major contribution to economic development in Liverpool.
