Businesses are still unwilling to bet on recovery after a worrying plunge in investment spending during the final quarter of last year, official figures showed today.
The Office for National Statistics' initial estimates of a 0.2% slide for the wider economy during the period were left unchanged but experts blamed debt turmoil in Europe for the 5.6% fall in business spending to £28.7 billion over the quarter.
Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said: "The climate of uncertainty has caused firms to sit on their cash and, even after this week's deal for Greece, it's difficult to envisage this situation changing significantly in the short-term."
There were some positives, however, as desperate price-cutting by retailers to open shoppers' wallets during the autumn helped household spending rise 0.5% - the first growth since early 2010. Rising exports combined with weakening imports - attributed to slower manufacturing growth in the second half of last year by the ONS - also saw a positive trade contribution adding 0.6 percentage points to growth. Despite gloom over the plunge in business spending, firms built up stockpiles at a far slower rate than in the previous quarter, dragging on overall growth. This is welcome because it raises the chances of avoiding a double-dip with higher production in the current quarter.
Samuel Tombs, UK economist at Capital Economics, warned that the difficult economic backdrop remained: "Households are unlikely to be able to keep increasing their spending as unemployment rises, credit constraints tighten and inflation continues to erode their real spending power."
Courtesy of Russell Lynch / 24th Feb 2012 / London Evening Standard
No comments:
Post a Comment