Today’s GDP results, demonstrating 0.2 per cent growth in the second quarter, has sparked concern among industry experts.
The increase, although in line with forecasts, has been described as “disappointing growth” by Jeremy Cook, the chief economist at World First foreign exchange.
Cook says this “feeble figure” will strengthen views that the government’s “deficit reduction plan is causing unnecessary pain.” Despite this, Cook says the results will not alter the government’s position on reducing the deficit for fear of drawing “considerable ire from the markets.”
The 0.2 per cent figure may have been heavily affected by a series of “special events in the second quarter, such as the Royal wedding and the Japanese tsunami.
The Office for National Statistics says these events may have contributed to as much as a 0.5 per cent downward impact on the results.
In contrast to Cook’s outlook is David Miller, a partner at Cheviot Asset Management’s assertion that the UK is a “beacon of sanity.”
“They may be weak figures, but the plan is working”, said Miller in an interview with Sky News after the results were made public.
“Investors will still be feeling optimistic; the fundamentals are right, we still have low interest rates and a well-managed and strong corporate sector which is delivering good returns to investors. Today’s figures will have quashed any idea of a rate rise soon, which will be welcomed by investors.”
Cook expresses particular concern over the figures for the manufacturing sector.
The ONS reports that manufacturing dropped by 0.3 per cent for the second quarter, in contrast with 0.7 per cent increase in the first quarter of 2011.
“We are worried about the 0.3 per cent fall in manufacturing over the past 3 months which shows that industry is not able to take advantage of the weak pound and exports, while up, are still not giving us what we need”, said Cook in a statement today.
Armstrong Investment Managers managing partner Patrick Armstrong (pictured) has said that future growth is also likely to be hampered by a lack of private consumption.
“Going forward, we expect UK private consumption will continue to remain weak throughout the remainder of this year and continued negative effects from fiscal tightening to hamper future growth.”
“We believe investors should be positioning portfolios in defensive equities such as telecoms and healthcare stocks and assets which can perform in a stagflationary environment.”