UK Economy Grows At Fastest Rate Since 2007

Features

  • Author: Digital Media Circle
  • Date: 27 Feb 2014
  • Copyright: Image appears courtesy of iStock Photo

Figures released by the Office for National Statistics (ONS) last month show that the UK’s economy has grown by 0.7%during the last quarter of the year. This means that annual growth throughout 2013 was 1.9%, the fastest rate of annual growth since 2007.

Positive News, But Work To Be Done

On the whole then, the news appears to be broadly positive for the UK’s economy. With the fastest rate of growth for more than 5 years, some analysts believe that George Osborne’s austerity measures have been successful in repairing the economy. Others, however, are either unsure of this view or are against it entirely, pointing to the fact that although we witnessed growth in the 4th quarter, it was down on the growth of the third quarter (0.8%) and that annual growth remains well below 2007's 3.4% pace.

thumbnail image: UK Economy Grows At Fastest Rate Since 2007

A Sector by Sector Breakdown

Much of the growth appears to have been fuelled by the UK’s service sector. Making up just over three quarters of the UK’s economic output, the sector grew by 0.8% in the fourth quarter, matching its expansion in the previous quarter. However, although the service industry grew, the same cannot be said for industrial production, as this fell by 0.1% during the quarter as a direct result of falling North Sea oil and gas output.

The UK’s ever shrinking construction industry (which now accounts for only 8% of GDP) fell by 3 % in the quarter, news that is undoubtedly bad for the government after the launch of their Help to Buy scheme which wa intended to rejuvenate the housing market.

Revised Growth Forecasts

Although it seems clear that the economic recovery is not yet complete, the signs coming from these newly released figures remain broadly positive, and the situation now appears much more positive than it did only twelve months ago. This time last year, the Office for Budget responsibility felt that the UK’s economy would only grow by 0.6% this year and now, as a direct result of these figures, both the Office for Budget Responsibility and the International Monetary Fund have revised their growth estimates for 2014 upwards by 0.5 %.

At Davos, Bank of England chief Mark Carney came under ever increasing pressure to raise its base interest rate. However, even in the face of these new figures, he appears to remain steadfast over the move, linking it to its inflation target of 2% and a further fall in unemployment beyond the current 7.1% level.

Overall, the news across the UK and over Europe as a whole at present appears to be broadly positive for investors. British growth coupled with Europe’s positive PMI figures mean that the EUR/GDP pair has been trading bullishly, creating investor appetite as a result. With the UK’s economy growing at its fastest rate since 2007, this could potentially be a sign of better things to come.

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