Azad Zangana, European economist at Schroders, said the Office for National Statistics’ (ONS) figures, which showed the UK economy contracted by 0.3% in the fourth quarter, suggested the country’s AAA rating would be lost in the near future.
“Part of the negative hit to growth was caused by an Olympics hangover, where the boost seen in the third quarter disappeared. This should be seen as a one-off hit to the economy. However, now that a negative GDP figure has been recorded, there is a significant risk that the UK economy suffers a triple-dip recession.
“Weak underlying economic activity coupled with the disruption of recent poor weather could cause GDP to fall in the first quarter of 2013,” he added.
But others felt fears of a triple dip recession were overblown.
Positive growth ahead?
Stewart Robinson, senior economist at Aviva Investors, predicted modest positive growth should resume in the first quarter of 2013 if leading indicators are to be believed.
“If you look at the second half of last year in aggregate, the economy has actually grown by 0.6%. That, in my opinion is a reasonable reflection of the underlying picture – modest growth at an annual pace of 1% to 1.5% which is weak, but still growth.
“Like many figures in the last few years, it is also possible that Q4 will actually be revised a little higher.”
He said the services sector Purchase Managers’ Index, which is used as a leading indicator has a business expectations balance which anticipates positive domestic demand growth private sector job gains still easily outweigh public sector job cuts, another positive sign.
Authorities also came under scrutiny from some commentators, with Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment laying it in thick.
“The UK economy is bouncing along the bottom in the weakest recovery in living memory. The more time that passes the clearer it is that America’s gradual and delayed approach to fiscal tightening is the right one. As the IMF belatedly concedes, it is far easier to balance the books when an economy is growing.”