UK to learn if it has entered "triple-dip" recession

LONDON: Britain finds out on Thursday if its stagnant economy has
slipped back into recession, a week after the International Monetary
Fund urged Chancellor George Osborne to consider scaling back his austerity programme.
Economists
estimate that Britain's $2.4 trillion (1.5 trillion pounds) economy
eked out growth of 0.1 percent in the first three months to March,
according to a Reuters poll. 07789768699
That would avoid a
second quarter of contraction - the definition of a recession - after it
shrank by 0.3 percent in the last three months of 2012.
But with
a margin this slim, the Office for National Statistics could easily
report a negative number in its initial estimate of gross domestic
product data at 9:30 a.m. British time, tipping the country into its
third recession in under five years.
A "triple-dip recession"
would come at an awkward time for Osborne, just days after ratings
agency Fitch stripped Britain of its top-notch credit rating and plans
to help homeowners in last month's budget came under fire from
legislators.
Osborne has stuck to his commitment to eliminate
Britain's underlying budget deficit in five years, despite consistently
disappointing economic growth figures that have led to mounting calls
for him to relent.
The IMF - previously supportive of Britain's
approach to deficit reduction - thinks some cuts may need to be deferred
given the weakness in demand. An IMF mission visits Britain next month
for an assessment of the country's economy that could include
recommendations for a change of course.
While the difference
between growth or contraction of 0.1 percent is statistically small,
analysts warn of a broader problem of stagnation and a risk of a
Japanese-style 'lost decade' of near-zero growth.
"The chance that you see a small contraction ... is pretty big," said Berenberg Bank
economist Rob Wood, who forecasts zero growth on the quarter. "But I
don't think this would change the underlying picture of an economy that
has gone nowhere for 18 months and is struggling with some big
headwinds," he added.
Britain has been much slower to recover
from the financial crisis than most other big economies. At the end of
2012 its GDP was still nearly 3 percent smaller than before the crisis.
Weak
demand from a recession-hit euro zone, a drag from the government's
deficit-reduction measures and high inflation eating into meagre wage
rises are all to blame.
Furthermore, the global economy is weakening and there are signs of slowing growth in the United States and China.
Adding
to the pressure on Osborne, influential academic research that helped
underpin his case for the need for rapid deficit reduction has recently
been challenged.
He has announced plans for mortgage guarantees
and shared equity loans for homebuyers to jump start the housing market,
but members of parliament's cross party Treasury Committee said on
Saturday the proposals were vague, had unclear costs and might not
succeed in increasing the supply of housing.
In another effort to boost the economy, the finance ministry and Bank of England expanded a scheme on Wednesday which aims to boost bank lending.
The
performance of the economy in the first quarter hinges largely on
whether Britain's dominant services sector - which had a strong January -
was hit hard by rare March snow. Industrial output is expected to have
been broadly flat, while the small construction sector is likely to have
contracted. - Reuters