THE longest double-dip recession since the 1950s may be over, but don't expect to find Graeme Leach popping the champagne corks any time soon.
GDP is predicted by City experts to have grown 0.6% between July and September in official figures published today, ending three consecutive quarters of declining output.
But Leach, chief economist and director of policy at the Institute of Directors (IoD), says the figures don’t tell the full story.
“If it was not for the one-off factors, I think we (would) see the UK economy contracting on an underlying basis,” he told The Journal.
“Demand from overseas is still pretty weak and inflation has been a bit slower to fall than we perhaps hoped.
“We are seeing the signs of green shoots but they are not sprouting in the sunshine because there’s a cloud hanging over us in the euro.
“Financial crisis-induced recessions normally take five to 10 years to fully work through. On that basis we are probably only halfway through it.
“The UK is far from out of the economic woods and can expect growth to slow in subsequent quarters.
“These latest GDP figures hide a multitude of stories across a variety of sectors. I know many IoD companies who are saying, ‘What financial crisis?’ Whereas others have experienced much tougher times.”
The return to growth will end nine months of contraction in which the economy shrank 1.1% as the austerity measures, high inflation and the eurozone crisis took their toll.
But the bounce-back in the third quarter has been largely driven by one-off factors, such as clawed-back activity lost to the extra bank holiday for the Queen’s Diamond Jubilee and a slight lift from the Olympics.
Economic indicators, such as purchasing manager surveys, suggest the manufacturing and construction sectors remained weak throughout the period, although the powerhouse services sector should deliver a robust performance.
Leach says the North East has some real strength sectors on which to build upon, including manufacturing, engineering and pharmaceuticals.
He said: “The outlook remains positive and many North East firms are actively taking advantage of emerging export markets including Russia, Brazil and India.
“However, unemployment figures remain worrying in the region, especially among the younger generation.
“This could be down to the fact that the North East may not have had enough companies in the fastest-growing sectors in the past and employees have been picked off from the other areas.
“There’s also a cultural issue up here whereby people are often reluctant to relocate to find work elsewhere and that results in high unemployment figures.
“What you were seeing prior to the financial crisis was the re-emergence of the North East, through outward investment and growing sectors, but the crisis has just taken some of the shine off that.”
Today’s figures, published by the Office for National Statistics (ONS), are a preliminary estimate based on the output side of the economy and is subject to revisions.
The economy shrank by 0.4% in the second quarter, according to the ONS, which was revised up gradually from an initial estimate of a 0.7% decline.
The Bank of England is expected to pump further emergency support into the economy next month through its quantitative easing programme, which hit £375bn in July.
