U.K. Recession Seen Ending After Olympic Ticket Sales
Britain’s first double-dip recession since the 1970s probably ended in the third quarter as ticket sales for the London Olympic Games helped revive growth.
Gross domestic product rose 0.6 percent from the previous three months, according to the median of 33 estimates in a Bloomberg News survey. The economy shrank 0.4 percent in the second quarter as wet weather and an extra holiday to mark the Queen’s Diamond Jubilee impaired growth. The Office for National Statistics will publish the data at 9:30 a.m. in London.
Bank of England Governor Mervyn King said this week that the recovery is proceeding at a “slow and uncertain” pace and a “zig-zag” pattern is likely to persist as global economic weakness spreads. Policy makers are due to complete their latest round of quantitative easing before their Nov. 8 meeting, when they’ll assess whether more stimulus is needed.
“The economy has broadly been flat lining, and various measures that have been thrown at the economy have been having a positive effect,”said Philip Shaw, an economist at Investec Securities in London, who forecasts 0.6 percent growth. “We’re now doubting whether we’re going to have any more QE this year. Still, the euro crisis is the great unknown in our forecasts.”
The Bank of England’s Monetary Policy Committee must decide next month whether to end its stimulus program or extend it beyond 375 billion pounds ($601 billion). The MPC will have new forecasts at the meeting that it will publish on Nov. 14.
Recent data has shown pressure on consumers easing. Inflation cooled to the slowest in almost three years in September, while retail sales increased more than forecast. Payrolls rose to a record in the quarter through August, pushing the unemployment rate down to 7.9 percent from 8.1 percent.
Still, the Confederation of British Industry said yesterday that its factory index fell to a 10-month low in October.
“At this stage, it is difficult to know whether some of the recent more positive signs will persist,” King said on Oct. 23. “The MPC will think long and hard before it decides whether or not to make further asset purchases. But should those signs fade, the MPC does stand ready.”
Whitbread Plc (WTB) said this week it expects sales growth at its Premier Inn budget chain to moderate after higher prices during the Olympics helped lift first-half profit by 11 percent. Chief Executive Officer Andy Harrison said the consumer market is “pretty flat” and generating any growth is “jolly difficult.”
Group of Seven
Britain is the first of the Group of Seven nations to report GDP data for the third quarter. U.S. growth probably accelerated to a 1.9 percent annual rate after expanding at a 1.3 percent pace the prior quarter, according to a Bloomberg survey before a Commerce Department report tomorrow. It would be the first back-to-back readings lower than 2 percent since the U.S. was emerging from the recession in 2009.
From a year earlier, the U.K. economy probably shrank 0.5 percent, according to a separate Bloomberg News survey.
The National Institute of Economic and Social Research estimated on Oct. 9 that the economy grew 0.8 percent in the third quarter. Still, stripping out one-time distortions, it said the pace of expansion is closer to between 0.2 percent and 0.3 percent.
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