British economy crawls free of record recession
LONDON: Britain narrowly escaped from recession in the fourth quarter of 2009, official data has shown, joining other countries including the United States and Japan in breaking free from the downturn.
The country followed its European peers France and Germany as it emerged from the worst global recession since the 1930s -- but lower-than-expected data on Tuesday showed only a modest crawl into positive territory.
Gross Domestic Product -- the value of all goods and services produced in the economy -- grew by just 0.1 percent in the three months to December, aided by the services sector, after a 0.2-percent contraction in the third quarter.
"The recession is officially over -- but only just," said Deutsche Bank economist George Buckley.
The positive figure, which dashed market expectations for a 0.4-percent expansion, marked the end of a deep recession which began in the second quarter of 2008 as a result of the global financial crisis.
The return to quarterly growth may also not be enough for Prime Minister Gordon Brown to keep his job in an election due by June, as the nation faces a tough recovery amid calls to tackle soaring state debt.
"While the UK may be officially out of recession, it is far from out of the economic woods," said IHS Global Insight economist Howard Archer.
Like many Western countries, Britain's public debt has rocketed as the government spent billions on financial stimulus measures and banking-sector bailouts in an attempt to avert economic meltdown.
Brown was "confident but cautious" about the outlook for the battered economy, his spokesman said on Tuesday.
The state of the economy has become the key battleground ahead of an election that is likely to see Brown's Labour Party defeated by the main opposition Conservatives, according to polls.
Whichever party wins power, the nation faces serious public spending cuts and taxation hikes in the years ahead to cut borrowing, economists said.
Finance minister Alistair Darling told the BBC that the recovery would be "bumpy".
"There are many bumps along the way, we are not out of the woods yet so I think my caution is right," he said.
"What I would say though is these figures, which show modest growth, demonstrate the need for us to maintain support for the economy now."
The Conservatives' finance spokesman, George Osborne, blasted the government over its handling of the economy.
"After this great recession, any signs of growth are welcome -- but these very weak growth figures show that Gordon Brown's government left us badly prepared for the recession and badly prepared for the recovery," Osborne said.
"We urgently need a new model of economic growth that includes a credible deficit reduction plan that keeps mortgage rates low, creates jobs and doesn't choke off recovery."
But Darling argued that the recovery could be compromised by cutting public expenditure too soon.
"If you start to take money out of the economy and start cutting (spending) too early you will end up wrecking the recovery."
The return to growth, after a record six straight quarters of contraction, means that Spain is the only major economy still trapped in recession after the worst global economic downturn since the 1930s.
Tuesday?s ugly Q4 GDP release was the latest in a line of disappointing hard data releases for the UK.
British GDP shrank by 3.2 percent in the fourth quarter, compared with the equivalent October-December period in 2008.
Some commentators argued that Britain's return to growth was skewed because temporary government measures had lifted GDP, particularly in the retail and car sectors.
Britain's Office for National Statistics said Tuesday that the economy shrank 4.8 percent in 2009 -- the biggest annual contraction on record. The government had forecast contraction of 4.75 percent in 2009, followed by growth of 1.0-1.5 percent this year.
The economy has shrunk by 6.0 percent over the last six quarters.
The IMF, however, sounded a more positive note Tuesday, saying the global economy was making a stronger recovery than expected.
It projected growth of 3.9 percent in 2010 which would mark a dramatic turnaround from a 0.8 contraction last year, in an update of its twice-yearly World Economic Outlook report published on October 1.