A Tale of Two Cities? Latest Economic Review from the ONS – was it the best of times or was it the worst of times….?

During the Last Week: The Office for National Statistics (ONS)has published its Economic Review, October 2012.

Gross Domestic Product (GDP) as measured shows that the UK Economy grew by 1% in the third quarter of this year (Q3 2012).

The economy rebounded strongly in the third quarter of 2012 from a depressed level in the second quarter partly as a result of the Diamond Jubilee bank holiday. Growth was also boosted by the effects of ticket sales for the Olympic and Paralympic Games. The preliminary estimate of GDP shows that the UK economy grew by 1 per cent between the second and third quarters of 2012, following three successive quarters of contraction.

However, in the third quarter of 2012, the economy was unchanged in size compared with a year earlier, even with the benefit of Olympic and Paralympic ticket sales which added 0.2 per cent to the level of GDP in the third quarter of 2012.  Excluding the ticket sales impact, the economy has grown by 0.4 per cent in total over the last two quarters, an average rate of 0.2 per cent a quarter.

Although this was the strongest quarterly growth since 2007, the underlying pattern is one of subdued economic expansion.  The economy is no larger than it was a year earlier, even with the benefit of Olympic and Paralympic ticket sales.

Other indicators of economic activity paint a mixed picture.  The labour market continues to perform strongly.   Employment levels reached a record high of 29.6 million in the 3 months to August, although at 71.3 per cent of the working age population it remains well below the peak rate of 73.1 per cent recorded in 2005.  Retail sales volumes also rose in September.  But exports and industrial production both recorded falls in the latest month’s figures.

Consumer price inflation fell to 2.2 per cent, but the squeeze on real earnings growth persists, albeit at a much reduced rate.

Latest public finance statistics suggest that the overall level of public sector borrowing in the first half of the 2012-13 financial year was only slightly higher than for the same period in 2011-12.

At “Ground Level”, amongst ordinary working people and non working people alike, the mood whilst generally welcoming of “good” economic reporting, nevertheless remains “pragmatic” sceptical or even suspicious, since the day to day relative cost of living appears to remain largely the same. How long will it take for economic fortune to filter down to bedrock? This all depends on the rate of change across the nation.

Whilst certain business sectors show positive signs and indeed careful investment might well be paying off in the markets, economic recovery rides on many factors including business momentum and consumer spending which in turn in the end depend on grass roots financial wellbeing.

Photo Credit: SBG PhotoStock.

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