UK economy perks up - but for how long?

The BCC reports Q2 growth of about 0.6%, but it's fretting about the service sector...

Last Updated: 06 Nov 2012

The latest economic snapshot from the British Chambers of Commerce paints a distinctly mixed picture. On the plus side, it's expecting growth of 0.6% to 0.7% in the three months to June, which is just about better than nothing. But the bad news is that there aren't many signs of life in the retail and services sectors, which make up about three-quarters of the economy. So it's possible that this may be as good as it gets for the foreseeable future - or even that we'll slip back into recession again...

Manufacturing was the big success story of last quarter. Domestic sales haven't been higher since the back end of 2007; new car sales, for instance, were up 11% year-on year in June, despite the end of the scrappage scheme, partly thanks to businesses finally re-stocking their fleets. And exports hit their highest level in almost four years - a sign that the weak pound is having the desired effect. Admittedly it wasn't all good news: 80% reckon rising raw material costs are putting upward pressure on prices. But in general, confidence is up across the sector.

Unfortunately, the reverse is true in the UK's dominant services sector. Optimism is in short supply, and no wonder: growth remains pretty sluggish, and with 'very austere times ahead', as the BCC puts it, the chances of a rapid recovery seem slim. This chimes with yesterday's figures from Chartered Institute of Purchasing and Supply/ Markit, which found that the sector grew at the slowest rate in nearly a year last month.

What's more, the consensus is that this kind of feeble growth is probably the best we're going to get for the time being - and if the measures announced in last month's Budget drive down demand even further, we could even find ourselves slipping back into recession. Maybe Sir Alan Budd - who's announced his intention to leave the brand-new Office of Budget Responsibility after just three months, much to general surprise - is getting out while the going's good.

And here's a 'what might have been' for you: Reuters reports that the Germans' World Cup exploits are apparently set to boost their GDP by up to 0.3%. So if this quarter disappoints, blame Wayne Rooney and co...

In today's bulletin:
UK economy perks up - but for how long?
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Ryanair flourishes as BA strikes hit home
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