[PEN-L:33367] growth

["Ian Murray" <seamus2001@xxxxxxxxx>]

Royal flush to the economy

Charlotte Denny, economics correspondent
Tuesday December 24, 2002
The Guardian

The economy shrugged off the gloom infecting world markets in the autumn
to expand at its fastest pace in nearly three years.
Aided by the bounceback after the jubilee shutdown, output rose by 0.9%
in the three months to September, according to figures published
yesterday by the office for national statistics.

Statisticians had calculated growth in the third quarter at 0.8%, but an
upward revision of construction activity accounted for the extra surge.

The headline numbers disguised a slowing economy. "Without the effect of
the jubilee, the data would not have shown an acceleration but a
deceleration in growth," said a statistician.

The ONS estimates that, if factories had not ratcheted up production to
make up for lost output during June's extended shutdown, third quarter
growth might have been as low as 0.2%.

"This is consistent with a slowing global economy, affected by
plummeting equity markets," said David Page, UK economist at Investec.
"To our minds, this does not bode well for fourth quarter growth,
despite an expected acceleration of retail sales growth over the
period."

Doubts about recovery were also prompted by an unexpected fall in
consumer confidence as the Christmas shopping season reached its height.

The consumer confidence barometer of research company Martin Hamblin GfK
tumbled to -4 in December, the lowest figure since October 2001, from +2
in November. The last time there was as large a month-on-month fall was
during the fuel protests in September 2000.

GfK blamed increased speculation about a housing market crash and a war
in Iraq for the lost confidence.

"[This] seems to be largely influenced by topical media reports. It is
believed that increased speculation of a crash in the housing market,
coupled with the very real threat of war with Iraq, have attributed to
this month's sharp fall of confidence," said GfK.

While households remained upbeat about their finances, retailers were
bracing themselves for a disappointing Christmas. The number of shoppers
visiting malls and other retail outlets fell by 7.2% during the week
commencing December 16, the last full shopping week, compared with the
same week a year ago, according to market analyst Footfall.

The economy needs to grow by about 0.6% in the final quarter for the
chancellor to meet his forecast last month of 1.6% growth, a target most
City economists believe he will meet despite slowing growth.

"The UK economy is still on track to grow by around 1.7% in 2002 as a
whole, not quite as good as the US but much better than the eurozone
where growth will be below 1%," Mr Walker said.

Had British industry not closed for the jubilee, the ONS said, the
economy would have notched up stronger growth in the second quarter of
between 0.8% and 1.3%, instead of the actual 0.6%. For the third
quarter, they estimate growth at between 0.2% and 0.5%.

The ONS added that households borrowed less than it thought in 2001
while firms spent more on investment.

"Neither the chancellor nor the Bank of England could have asked for
much more from Santa," said Danny Gabay, UK economist at JP Morgan. "At
the stroke of the statistician's pen, the UK household sector looks
considerably less indebted than we thought, UK investment spending not
so weak and so the economy less prone to a sudden correction."