Duncan Lawrie Online ▼

Posted on: 11 June 2013 by James Humphreys

The British economic outlook has been given a welcome boost thanks to a recent revision of preliminary data on UK growth in 2012. New figures, to be confirmed later this month, suggest that the construction industry shrank by 5% in the first quarter of 2012 rather than the 5.4% initially reported. Although only a minor change, the new information could mean that rather than shrink into a double-dip recession, the economy merely flat-lined in 2012.

Why is this important? What difference could this news possibly make to the markets that have since moved on from the original announcement? Well, quite a lot actually because this good news could have an encouraging effect on inspiring confidence in investors which is vital to help stimulate the economy. 

Over the years, we have grown used to taking the preliminary findings on economic growth as a guide to how the economy is performing. The results have, in fact, always been reviewed at a later point and we have often seen a change.  None of this mattered when a few percentage points made little difference in a booming economy, but with the economy so finely balanced, the preliminary results may have unintentionally shot UK markets in the foot this time.

The preliminary results have been the media and political battleground on the economy for so long now that very few people know that this later review of the figures is actually common place. But that is the world in which we now live - we want instant news and dramatic headlines about economic turmoil.

Thankfully though, not all market commentators are like this. Alex Brummer at The Daily Mail, for example, uses headlines such as "Britain's disguised growth story" and dismisses terms such as "flat-lining", "double dip" and "tax cuts for millionaires" as political inventions. Indeed the picture is not as bad as one might first assume, even the outgoing Governor of The Bank of England, Sir Mervyn King, raised hopes for the future of the economy claiming that growth will now be "stronger"- the first time he has been able to say this since before the financial crisis.

The growth that Brummer and King talk about is being driven by deals being made by British businesses in emerging markets such as Brazil and parts of Asia. In addition, the retail industry, perhaps hit the hardest by the recession, is starting to turn things around by successfully engaging technology specialists and driving online sales, which now make up 15% of the market.

While there is no question that the wheels are in motion, there is more work to do. The time has come to stop relying on hyperbole and speculation, but to take into account all the information and statistics at hand and take a long-term look at the markets. By doing so I think that investors will be pleasantly surprised by what they see...

Share this article