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UK Claws Itself Out Of Recession

The UK Claws Itself Out Of Recession

 

The UK economy finally exited the double-dip recession as it grew by 1% in the third quarter, between July and September, but questions are still being asked about the very real threat of a triple-dip recession in the coming year.

2012 has been a strange month for economic growth and decline, reports Neil Prothero of the Huffington Post, with one-off factors contributing to drastic, and often misleading, Gross Domestic Product (GDP) figures.

In June, the Queen’s Jubilee allowed for one less working day in the second quarter than the third, but the increase in workers taking extended holidays also contributed to a slow economy, costing roughly 0.4-0.5% to the GDP figure.

Contrastingly, the London 2012 Olympics paid great dividends to the GDP figures at the end of the third quarter, mostly from ticket sales, although an increase in local tourism and spending also accounted for a better quarter.

Tickets were sold in waves throughout 2011 and 2012, but the Office for National Statistics (ONS) allocated the economic impact of these tickets to the quarter when the Olympics actually took place. It is estimated by the ONS that the Olympics gave the economy a boost of roughly 0.2% overall.

So we can’t make a quick assumption just yet as to what the economy will actually do in the coming year. The outlook is as uncertain as ever, not only because the true reflection of economic growth and shrinkage over the past two quarters is slightly skewed by the reasons above, but the crisis in the Euro zone continues to fluctuate.

The Threat Of A Triple Dip

Banks are claiming that the hefty repercussions of the UK’s biggest ever financial scandal – the mis-selling of PPI – is a contributing factor to the difficulties that the UK economy is seeing in achieving stability and gaining momentum in a positive direction.

Senior bankers claim that the £13 billion scandal is drastically reducing the amount of new lending the banks are capable of performing, because all of their profits are being given straight back to the consumers who are claiming for Payment Protection Insurance.

If the economy is to continue in this unrelenting and unpredictable manner, then by April next year we could be facing a triple-dip recession.

A recession occurs when a country’s GDP experiences two straight quarters (six months) of negative growth. A double-dip recession happens when, after a period of positive growth for the economy, there is a further two consecutive quarters of negative growth.

Therefore, a triple-dip recession would be two more quarters of negativity, after a period of positivity, i.e. the third quarter growth we have just experienced. This would be the third recession in four years, an absolutely unprecedented statistic. 






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