Britain's recovery is expected to have held up over the final months of 2013, helping the economy to clock up its strongest annual growth for six years.
While there is still much ground to cover to get back to pre-crisis levels of output, most economists expect official data on Tuesday to confirm that last year ended on a relatively strong note.
Many see growth for 2013 being just shy of 2%, marking the strongest performance since 2007. On average, City analysts forecast the economy grew 0.7% in the fourth quarter, down slightly from 0.8% in the previous two quarters.
But that consensus, in a Reuters poll of 50 economists, masks a wide spectrum of forecasts that go as low as 0.3% growth and as high as 0.9%.
Official data has been mixed in recent weeks, with construction and manufacturing appearing to stall while retail sales shot up at Christmas – a mix that runs counter to the government's attempts to rebalance the economy away from reliance on domestic demand.
Last week's drop in unemployment was good news for ministers but far greater than the Bank of England had been forecasting and may well force it to abandon its forward guidance policy.
While employment has risen, pay has on average failed to keep up with inflation, squeezing living standards for several years. Income from employment increased only marginally in January, according to the latest monthly survey of households' financial wellbeing on Monday from the data company Markit.
But households were generally less gloomy about their finances, Markit said, with the main measure of wellbeing at its joint highest level since the survey began five years ago.
"January's survey highlights some light at the end of the tunnel for UK households, with falling consumer price inflation and better labour market conditions helping to bring down the squeeze on finances after five years of gloom," said Tim Moore, a senior economist at Markit.
Unlike the uneven official data, business surveys have painted a generally positive picture in recent months, leaving economists to weigh up mixed evidence as they try to predict this week's growth figures from the Office for National Statistics – the first of three takes it will publish on fourth-quarter GDP.
Philip Shaw, economist at Investec, is forecasting 0.7% growth. "Although the economic outlook remains upbeat, specific factors suggest that growth during the fourth quarter did not quite keep pace with the two previous quarters," he said, citing a drop in construction output and flatlining industrial production.
"Fundamentally we would argue that an out-turn of 0.7% should not be a disappointment. The indicators are volatile and subject to revision while in any case there is no evidence whatsoever that the recovery is petering out." Jonathan Loynes at the thinktank Capital Economics goes for 0.8% growth.
"While slightly less than the [Bank of England's] monetary policy committee, for example, is expecting, this would still take annual growth in 2013 as a whole to 1.9%, the best performance since 2007," he said.
Although the construction sector, which accounts for just over 6% of the economy, has been seen as dragging on growth in the fourth quarter, there are signs in a report on Monday that it is picking up.
Makers of bricks, steel, plumbing and other building materials have enjoyed a rise in demand and expect sales to continue climbing, according to a survey by the Construction Products Association (CPA).
Overall, two-thirds of construction product manufacturing firms reported a rise in sales in the fourth quarter compared with the previous quarter and with the previous year.
There have been concerns that manufacturers which mothballed plants and laid off workers in the downturn are now struggling to keep up with the resurgence in demand for building materials. Builders and estate agents have highlighted a brick shortage in particular as the government's Help to Buy scheme boosts the housing market.
But the CPA seeks to allay those fears in its report, stating that most of the companies it surveyed do not foresee capacity problems this year. Three-quarters of all product manufacturers will be operating at less than 90% capacity at the end of this year, it said.
Noble Francis, the group's economics director, said construction growth had spread beyond the private housing sector to commercial and infrastructure projects.
"Of concern, however, manufacturers reported margins continue to be severely hindered by cost rises, especially in energy and transport fuel. In addition, manufacturers also reported that labour costs and materials costs rose in the fourth quarter," he said.
Separate figures released on Monday by the trade association, UK Steel, found that demand for steel rose in 2013. Production remained well below the levels seen before the financial crisis, however, and the recovery was "weak and patchy".
British crude steel production in 2013 averaged 228,000 tonnes a week, 24% higher than in 2012. That was largely due to rising output from the Teesside steelworks, now owned by the Thai company SSI, and from Tata Steel's Port Talbot plant.
Ian Rodgers, director of UK Steel, said the fourth quarter output was the highest quarterly level since the start of the recession. "This suggests that UK demand for steel has now turned the corner."
theguardian.com
While there is still much ground to cover to get back to pre-crisis levels of output, most economists expect official data on Tuesday to confirm that last year ended on a relatively strong note.
Many see growth for 2013 being just shy of 2%, marking the strongest performance since 2007. On average, City analysts forecast the economy grew 0.7% in the fourth quarter, down slightly from 0.8% in the previous two quarters.
But that consensus, in a Reuters poll of 50 economists, masks a wide spectrum of forecasts that go as low as 0.3% growth and as high as 0.9%.
Official data has been mixed in recent weeks, with construction and manufacturing appearing to stall while retail sales shot up at Christmas – a mix that runs counter to the government's attempts to rebalance the economy away from reliance on domestic demand.
Last week's drop in unemployment was good news for ministers but far greater than the Bank of England had been forecasting and may well force it to abandon its forward guidance policy.
While employment has risen, pay has on average failed to keep up with inflation, squeezing living standards for several years. Income from employment increased only marginally in January, according to the latest monthly survey of households' financial wellbeing on Monday from the data company Markit.
But households were generally less gloomy about their finances, Markit said, with the main measure of wellbeing at its joint highest level since the survey began five years ago.
"January's survey highlights some light at the end of the tunnel for UK households, with falling consumer price inflation and better labour market conditions helping to bring down the squeeze on finances after five years of gloom," said Tim Moore, a senior economist at Markit.
Unlike the uneven official data, business surveys have painted a generally positive picture in recent months, leaving economists to weigh up mixed evidence as they try to predict this week's growth figures from the Office for National Statistics – the first of three takes it will publish on fourth-quarter GDP.
Philip Shaw, economist at Investec, is forecasting 0.7% growth. "Although the economic outlook remains upbeat, specific factors suggest that growth during the fourth quarter did not quite keep pace with the two previous quarters," he said, citing a drop in construction output and flatlining industrial production.
"Fundamentally we would argue that an out-turn of 0.7% should not be a disappointment. The indicators are volatile and subject to revision while in any case there is no evidence whatsoever that the recovery is petering out." Jonathan Loynes at the thinktank Capital Economics goes for 0.8% growth.
"While slightly less than the [Bank of England's] monetary policy committee, for example, is expecting, this would still take annual growth in 2013 as a whole to 1.9%, the best performance since 2007," he said.
Although the construction sector, which accounts for just over 6% of the economy, has been seen as dragging on growth in the fourth quarter, there are signs in a report on Monday that it is picking up.
Makers of bricks, steel, plumbing and other building materials have enjoyed a rise in demand and expect sales to continue climbing, according to a survey by the Construction Products Association (CPA).
Overall, two-thirds of construction product manufacturing firms reported a rise in sales in the fourth quarter compared with the previous quarter and with the previous year.
There have been concerns that manufacturers which mothballed plants and laid off workers in the downturn are now struggling to keep up with the resurgence in demand for building materials. Builders and estate agents have highlighted a brick shortage in particular as the government's Help to Buy scheme boosts the housing market.
But the CPA seeks to allay those fears in its report, stating that most of the companies it surveyed do not foresee capacity problems this year. Three-quarters of all product manufacturers will be operating at less than 90% capacity at the end of this year, it said.
Noble Francis, the group's economics director, said construction growth had spread beyond the private housing sector to commercial and infrastructure projects.
"Of concern, however, manufacturers reported margins continue to be severely hindered by cost rises, especially in energy and transport fuel. In addition, manufacturers also reported that labour costs and materials costs rose in the fourth quarter," he said.
Separate figures released on Monday by the trade association, UK Steel, found that demand for steel rose in 2013. Production remained well below the levels seen before the financial crisis, however, and the recovery was "weak and patchy".
British crude steel production in 2013 averaged 228,000 tonnes a week, 24% higher than in 2012. That was largely due to rising output from the Teesside steelworks, now owned by the Thai company SSI, and from Tata Steel's Port Talbot plant.
Ian Rodgers, director of UK Steel, said the fourth quarter output was the highest quarterly level since the start of the recession. "This suggests that UK demand for steel has now turned the corner."
theguardian.com
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