Liam Halligan: The UK's economic recovery may be under threat
Growth is slowing and inflation rising - the Chancellor's economic predictions may not come to pass
The UK economy is still growing, but the pace of recovery is slowing. And our economy, unusually among the G7 group of leading industrialised nations – has yet to fully recover from lockdown, with British Gross Domestic Product – or GDP – still smaller than it was prior to this ghastly pandemic.
That GDP measure, the mostly commonly used gauge of economic activity, was just 1.3 per cent higher between June to September than it was during the same period in 2020. The same figure between April and June was 5.5 per cent – so growth has slowed down considerably.
Chancellor Rishi Sunak insists that the UK is doing better than other advanced nations, except the US – where GDP grew by 2 per cent between June and September, the third quarter of the year.
But while UK growth now is slightly faster than most similar nations, our economy remains 2.1 per cent smaller than at the end of 2019 – prior to the pandemic. That’s a bigger shortfall than the likes of Germany, Italy and France, while only the US among the big Western economies has fully recovered to pre-pandemic levels.
This third quarter slowdown – from 5.5 per cent to 1.3 per cent growth – shows that, after the initial post-lockdown bounceback, the UK economy is now suffering from on-going supply chain snarl ups.
Amidst cost of living rises and spiralling energy bills, consumer confidence – and retails sales – fell over successive summer months, although the October numbers show some recovery. But even that could be due to early Christmas shopping – with shoppers worrying we could see winter shortages.
In his budget statement last month, Sunak based all his sums on full-year growth projections of 6.5 per cent this year and 6 per cent in 2020. Will that really happen - the Britain hasn’t expanded at that pace for more than 50 years. And today’s figures do little to inspire trust the Chancellor's high growth forecasts will be met. And looming large over the UK economy, of course, is inflation, now expected to hit 5 per cent over the coming months - well over double the Bank of England's 2 per cent target.
The US just recorded its highest headline rate for more than 30 years yesterday – 6.2 per cent. The Bank of England’s previous insistence high UK inflation will be “transitory” is starting to look rather silly."
But with GDP growth slowing and inflation rising, the question must be asked? Is the UK recovery under threat?