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U.K. Economy May Struggle to Grow

 
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hurricanemaxi



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PostPosted: Tue Nov 01, 2011 3:03 pm    Post subject: U.K. Economy May Struggle to Grow Reply with quote

The U.K. economy grew faster than forecast in the third quarter as manufacturing and services industries rebounded from disruptions during the previous three months.

Gross domestic product rose 0.5 percent from the second quarter, when it increased 0.1 percent, the Office for National Statistics said today. Economists forecast a 0.3 percent increase, based on the median estimate of 36 economists in a Bloomberg News survey. A separate report showed manufacturing unexpectedly shrank in October, pointing to continued weakness in the economy at the start of the fourth quarter.

The Bank of England expanded stimulus for the first time in two years last month and the government is working on a plan to boost lending as Europe’s debt crisis raises the risk of another U.K. recession. With the rise in third-quarter GDP partly due to a rebound from one-time factors, Bank of England Markets Director Paul Fisher has said the pace may not be sustained and there’s a chance of stagnation in the current quarter.

“We doubt that rate of expansion will last,” Alan Clarke, an economist at Scotia Capital in London, said before the data was released. “The bulk of the strength is likely to prove temporary and is the result of the reversal of influences that held back second-quarter growth.”
Manufacturing Slump

An index of manufacturing by the Chartered Institute of Purchasing and Supply fell to 47.4 in October from 51.1 in September. That’s lower than the 50 reading that was the median forecast in a Bloomberg survey.

The pound fell as much as 0.2 percent against the dollar after the reports were published. On the day, sterling was down 0.8 percent at $1.5954 as of 9:33 a.m. in London.

European stocks also fell today after Greek Prime Minister George Papandreou pledged to hold a referendum on Europe’s latest bailout for the nation, raising concern it may default. The FTSE 100 Index (UKX) fell 2.1 percent, while Europe’s Stoxx 600 Index dropped 2.6 percent.

In the third quarter, U.K. services output grew 0.7 percent, while industrial production increased 0.5 percent, the statistics office said. The increase in services was led by finance and business services, which jumped 0.8 percent, the most since the third quarter of 2007, just before the start of the financial crisis. Within that category, growth was led by call centers, trade shows and office support businesses.

Barclays Plc (BARC), Britain’s second-biggest bank by assets, yesterday posted quarterly profit that beat estimates as earnings at the U.K. consumer bank more than doubled and investment bank revenue declined by less than European peers.
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