Slowing economy could make Brown alter plans: ONS revised numbers |
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Thu, 29 Sep 2005 16:05
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LONDON: Chancellor Gordon Brown may have to revise his GDP forecast yet again, in view of the latest numbers from the Office for National Statistics.
The new figures said the UK economy grew by only 0.5 percent during the April-June quarter, compared to the previous quarter. This is the slowest annual growth seen in 12 years, the ONS said. In this year’s second quarter, its annual growth rate was barely touching 1.5 percent, suggesting Mr Brown had been too optimistic in his forecast.
Already the chanceller had admitted once during the annual International Monetary Fund and the World Bank meeting in Washington last week. The actual growth of the economy was far below his ambitious projection of between 3 and 3.5 percent.
At the time he had accepted that higher oil prices would add pressure on economy growth. The slowing economy could make him change, or altogether drop, many of his plans which include steps to cut child poverty and increase educational opportunity.
The downward revision was on account of lower estimates for public administration, defense and transport and storage of motor cars. The automobile business had been hurt particularly after MG Rover went into administration and a corresponding drop in demand in the transport sector pushed industry revenues lower still.
There was a revision also in household spending rising 0.4 percent and not 0.2 percent reported last month. Analysts said the miscalculation was led by higher estimates for overseas spending and home improvement.
The slowdown in high street meant households were saving more and having more disposable incomes which rose 11 percent surprising analysts who had earlier warned of rising fuel prices and utility bills shrinking incomes.
Despite the bleak numbers, the chancellor sees a sliver lining: employment is at a record high and the economy has seen 52 consecutive quarters of growth.
The current ONS numbers have prompted the CBI Distributive Trades Survey to predict a tough Christmas this year.
Meanwhile, most sectors were anticipating interest rates to remain at their current level of 4.5 percent. Retailers insist that another cut would help revive their business. The Bank of England’s MPC meets next week to decide on the interest rate.
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