Publications
Partners
London - Britain was this week set to confirm its official exit from a deep recession, although a return to growth would fail to signal a rosy future for the country's fragile economy, according to analysts.
Economists' consensus forecast is for Britain, which is not part of the eurozone, to have returned to growth in the third quarter, or July-September period, after falling into a double-dip recession in late 2011.
Positive retail sales data published last week added to market belief that British gross domestic product (GDP) had turned positive heading into 2013.
All will be revealed on Thursday, when the Office for National Statistics publishes its first estimate of third-quarter GDP.
"The release of the preliminary GDP data for the third quarter should see the UK officially exit recession after three quarters of contraction," said Howard Archer, chief UK economist at IHS Global Insight research group.
But he warned: "The UK still has a very tough job in developing significant sustainable growth given tighter fiscal policy, ongoing serious problems in the eurozone and generally soft global growth.
"In addition, there are still significant pressures facing consumers that are likely to limit the upside for their spending for some time to come," Archer added, citing rising inflation on higher energy and food prices and an uncertain jobs outlook despite recent positive employment figures as some of the reasons.
British annual inflation slowed to almost a three-year low at 2.2% in September, recent official data showed, but analysts warned that recent domestic energy price hikes would reverse the decline over the coming months.
With inflation falling for now, the Bank of England has left the door open for more stimulus in the form of quantitative easing (QE).
The bank's nine-strong Monetary Policy Committee (MPC) has underpinned the British economy with a total of £375bn in new money since March 2009.
"With any recovery currently looking feeble and fragile, we lean towards the view that a majority of MPC members will decide to give the economy a further helping hand in November through more quantitative easing," said Archer.
Under QE, the central bank creates new cash which is used to purchase assets such as government and corporate bonds to increase lending by retail banks and boost economic activity.
Double-dip recession
Britain escaped a deep downturn in late 2009 but fell back into recession at the end of 2011. The recent London Olympics and celebrations to mark Queen Elizabeth II's Diamond Jubilee on the British throne failed to deliver a major boost to growth.
"The economy is likely to continue to underperform in coming quarters, with roughly zero real GDP growth over 2012-13 combined," said Citi analyst Michael Saunders.
The Conservative-Liberal Democrat coalition government blames Britain's economic ills on the debt crisis in main trading partner the eurozone and on the high level of debt inherited from the previous Labour administration.
But the main opposition Labour party claims that Britain's downturn is mainly a result of rapid and hefty cuts to state spending by the coalition that have resulted in thousands of job losses across the civil service.
British GDP contracted by 0.4% in the second quarter after shrinking by 0.3% in the first - and by 0.4% in the final quarter of 2011.
"The UK data week ahead may well prove to be noteworthy with UK third-quarter GDP figures... set to have a plus sign in front of them for the first time since the third quarter of 2011," said Victoria Clarke, an analyst at Investec financial group.
"Indeed, we expect that the forthcoming release... to show UK GDP having risen by 0.6% on the quarter, its strongest showing since the third quarter of 2010."
