By Mark Smulian
11 May 2010
The UK economy continues to be characterised by weak growth that is vulnerable to any shock, according to a leading economic think-tank.
The National Institute for Economic and Social Research’s monthly estimate of gross domestic product, published today, says output grew by 0.5% per cent in the three months ending in April. This represents an increase on the 0.2% reported by the Office for National Statistics for the quarter ending in February.
The institute says there has been buoyant production in March and ‘the competitive situation in which the UK economy finds itself following the exchange rate adjustments of the last two years is beginning to have a favourable effect on output’.
NIESR director Martin Weale says the new figures would have little impact on the government’s finances. ‘I’m not sure this means very much for public spending on its own, and my expectation is that growth will be weaker than the Treasury has predicted because output is still not growing enough to fill capacity in the economy,’ he tells Public Finance.
He says the European Union’s rescue package for the euro shows that ‘policy-makers are very aware of the risks that further financial shocks might lead to a double-dip [recession] and this in turn increases the prospects for a stable recovery’.
But Weale says the euro deal is unlikely to directly affect the UK unless it comes unstuck.
‘It would affect us if the euro disintegrated or if the single market did, because Europe is our main trading partner,’ he says.
