We’ve all watched the news and read the newspapers telling us that the UK economy has shrunk and fallen back into a recession, but why are so many economists and financial experts doubting the news?
The weeks preceding the Office Of National Statistics gloomy revelation were full of good news for the UK economy. March’s PMI figures showed a surprise increase in the amount of manufacturing taking place, reporting its fastest growth for ten months. In February industrial production had grown by 0.4%.
In early April the Bank of England declared that it was ceasing its quantitative easing measures, that news caused the pound to surge strongly against most of the other major currencies. A week later the Pound had reached a nineteen month high against the Euro and broke through the 1.600 figure against the Dollar. Overall things were looking peachy for the UK, all the data pointed to growth. That was until the ONS spoilt the party with its recession news.
Markit the organisation that compiles the PMI data was confused by that assessment. Chris Williamson, Markit’s chief economist, commented: “Companies continued to report rising levels of new business, which helped drive confidence to the highest for over two years. From what we are hearing from panelists, this certainly does not sound like an economy in recession.”
Other indicators, such as the recent small fall in unemployment in the three months to February and the relatively strong retail sales growth figures for March, also point to an economy showing very modest growth rather than one heading back into recession.
With so many financial institutions gathering data you would have thought that the picture would be clearer. All of the signs had pointed to a small growth in GDP as manufacturing and retail sales showed signs of improvement.
Unemployment rates also showed signs of improvement.
What body do we trust for the most accurate picture on the economic situation? The government’s broader stats or the various institutions more focused figures. Either way it is a debate that is sure to escalate as time goes on.
The Pound to Euro exchange rate is currently trading at 1.232
The Pound to US Dollar exchange rate is currently trading at 1.618
The Euro to US Dollar exchange rate is currently trading at 1.313
The Euro to Pound exchange rate is currently trading at 0.811
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