Another hint the austerity induced deficit may have gotten large enough to stabilize things and promote a bit of growth.

U.K. Economy Barely Grew In Quarter Through May, Niesr Estimates

By Svenja O’Donnell

June 12 (Bloomberg) — The U.K. economy barely grew in the quarter through May after contracting in the previous three months, according to the National Institute of Economic and Social Research.

Gross domestic product grew 0.1 percent in the period, after declining at the same rate in the three months through April, Niesr, whose clients include the Bank of England and the U.K. Treasury, said in an e-mailed statement in London today.

Data today showed U.K. manufacturing fell more than economists forecast in April, while industrial production was unchanged, pointing to continued weakness in the economy at the start of the second quarter. Britain has slipped back into recession and Bank of England policy makers have warned of threats to the economy from the euro-area crisis.

“Economic activity remains very weak,” the institute said. “We expect the U.K. economy to remain broadly ‘flat’ over the next six months.”

The U.K. economy is forecast to recover in 2013, Niesr said, though “significant downside risks persist.”

8 Responses

  1. If the data had been worse, would you not have said: “another sign that austerity is not working and monetary policy is shooting blanks” ? 🙂

    1. It’s still all a sign that monetary policy is shooting blanks.

      What’s happening is the deficit, while created ‘the ugly way’- via counter cyclical automatic stabilizers- is none the less doing its thing to reverse the decline.

      The real risk last summer was the debt ceiling limit would have removed the automatic stabilizers- in the down turn govt spending would not have been ‘allowed’ to go up,
      and falling revenues would have forced more spending cuts.

  2. @ Cesar

    Thanks for the tip. I’ll pass it on to my sources who btw were adamant – while on business trips to Sweden and then Holland they were not able to open a bank account at a regular branch. “Only for residents in the country”, they were told.

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