The
level of UK GDP is approximately 0.2pc above
where it was in January 2008, according to The National Institute of Economic
and Social Research
Britain
has reached the “symbolic
milestone” of clawing back all the losses it suffered during
the Great Recession, a leading think-tank said on Tuesday, while strong
manufacturing figures added to evidence that the recovery is broadening out.
The
National Institute of Economic and Social Research (NIESR) said the UK economy
grew by 0.9pc cent in the three months to May, following growth of 1.1pc in the
quarter to April. By this estimate, the level of UK gross domestic product
(GDP) is approximately 0.2pc above its previous high-point in January 2008.
Jack
Meaning, a research fellow at NIESR, said “robust” growth rates over the past
twelve months had bought the UK economy back to its pre-recession peak. “The
growth has been reasonably broad-based. The pick-ups were initially in
consumption but now there is some rebalancing towards investment activity as
well,” he said.
NIESR’s
analysis came as official data showed manufacturing rose at its fastest annual
pace in three years in April, indicating a broadening of the expansion.
Industrial
production increased by 3pc between April 2013 and April 2014, while
manufacturing increased by 4.4pc over the same period, according to the Office
for National Statistics (ONS). On a monthly basis, production increased by
0.4pc between March and April.
“British
factories are booming,” said Chris Williamson, chief economist at Markit. “The
official and survey data also help to dispel the notion that the recovery is
based purely on consumer credit and the housing market, but is instead being
fuelled to a large extent by booming factories and industry.”
All
of the main sectors were higher than they were a year ago except for
electricity, gas, steam & air conditioning, which saw a decline in output
of 11.5pc.
The
ONS said that warmer weather probably reduced demand for gas and electricity.
Michael
Saunders, chief UK economist at Citibank, described the robust manufacturing
growth as a “march of the makers”, while Martin Beck, senior economic advisor
to the EY ITEM Club, said the manufacturing sector remained “the golden child of
the industrial renaissance”.
Mr
Beck said: “A decent expansion in manufacturing output and a continued
rebalancing of the economy look set to continue.” However, he added: “One thing
lacking in the official data in recent months has been overseas demand, weighed
down in part by the strength of the pound.”
Analysts
also said Tuesday’s data kept the UK economy on track to expand at its fastest
annual rate since 2007. NIESR expects the economy to grow by 2.9pc in 2014 and
2.4pc in 2015. A separate report by the Organisation for Economic Co-operation
and Development (OECD) said UK growth remained at “above trend rates” in April,
suggesting that the recovery is gaining traction.
However,
Mr Meaning said that compared to other major countries, the UK was one of the
last to surpass pre-recession GDP levels.
“France
was marginally earlier than us and America was quite a bit earlier than us. It
is the Eurozone counties such as Italy, Spain and Greece that are still below
pre-recession peaks,” he said. “I think this is a symbolic milestone. It may
give a small confidence effect. But we really need a pick-up in other things
such real wage growth, which is still at the same level as it was 2004.”
NIESR
expects real wages to regain the 2009 high towards the end of 2018. It also
believes GDP per capita will not recover to pre-crisis levels until 2017.
Factory output also remains 7pc below its peak, in contrast to services sector
output, which is already well above pre-crisis levels.
Business
Secretary Vince Cable said this week that while the UK’s economic recovery is
“generally a good story”, it still needs to shift towards exports.
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