While only a slight growth of 0.2% was predicted for the UK economy between April and June, the latest data shows that it actually grew 0.1%, underperforming even the pessimistic forecasts.
The service sector grew by 0.2%, falling well short of the Office for National Statistics’ (ONS) prediction of 0.5%.
The Treasury used these figures as an example for the fact that the UK economy is still growing, and to further resolve for the deficit reduction drive.
The treasury has no plans to stop its austerity measures despite Wednesday’s IMF warning against sweeping budget cuts that may hinder growth.
Along with the news that the UK economy is coming in under predictions, the ONS has revised its growth predictions for the first financial quarter in 2012. They expect a 0.4% rather than 0.5% growth during the first three months of the year.
ONS figures also show that household consumption fell by 0.8% from April to June.
However, a separate Markit/CPIS survey marked the UK’s service sector purchasing managers’ index (PMI) at 52.9 for September, indicating modest growth. The figure is also up from 51.1 in August.
The Treasury said of the Markit research results: “While the UK cannot insulate itself from what is happening to our major trading partners, with financial turbulence in the eurozone and a weaker outlook for global growth, the economy is still growing and this week’s survey data for the manufacturing and service sectors are consistent with continued expansion.”
Hard times ahead
Despite the heartening statement from the treasury bolstered by good news from the service and manufacturing sectors, the cut ONS predictions for 2012 raise questions about the strength of the struggling UK economy.
Head of British Retail Consortium Stephen Robertson said: “The next six months are going to be characterised by very low levels of growth. I think we’ve probably got another 18 months of real challenge.”
Because of the challenging state of the economy, speculations are continuing to grow about the new bout of quantitative easing (QE) that may come from the Bank of England.