UK economy has grown by only 0.2%

The dreaded GDP figures for the second quarter of 2014 have been announced this morning. The Office of National Statistics announced that the UK economy has grown by just 0.2%.

GDP or Gross Domestic Product measures the growth in the economy and is arguably the most important of all economic statistics as it captures the state of the economy in one number. The Office for National Statistics calculates GDP by considering: the value of the goods and services produced by all sectors of the economy; the value of the goods and services purchased by households and by government; and the value of the income generated mostly in terms of profits and wages

There were concerns that the growth figure published today would be negative and therefore show that the economy had contracted. However, this would not mean that the UK was in a recession since the definition of a recession entails two consultative periods of negative growth.

While the GDP figure of 0.2% should not be celebrated, it does come as a relief that it was not negative. It shows that the UK economy is growing, albeit slowly. With all the uncertainty surrounding the Eurozone and the US at the moment it is reassuring to see that the UK has escaped the instability for now.

After a growth of 0.5% in the first quarter of 2014, this morning’s announcement shows that the economy is growing at a slower rate and fears of a double-dip recession cannot be calmed.

Reasons given by analysts for the minuscule growth rate this quarter were April’s extra bank holiday for the royal wedding and the effects of the Japanese earthquake and tsunami in March.

The Labour party have put pressure on the government to come up with a “plan B” for the economy and have argued that the coalition’s strategy of spending cuts and tax rises to reduce the national deficit is cutting too much and too fast and is obstructing growth. However, David Cameron insisted there is no money for a fiscal stimulus.

Looking ahead, there are not many positive factors to suggest growth in the 3^rd quarter of 2014 will be any better than today’s announcement. The euro-crisis and the US debt crisis have resulted in a major lack of confidence in the markets and the effects of raising aid for the Somalia famine may also have an effect on growth.

Do you view this morning’s announcement as good news; the economy is at least still growing? Or do you believe this shows that the economy has flat lined and more needs to be done to encourage growth?

Related posts:

1. Results of NIESR survey: UK economy is slowing