Member Article

GDP decreases but region remains bullish

THE REGION’S business leaders have said sales and orders are still growing in the North East, despite yesterday’s shock contraction in the UK economy.

The UK’s economy suffered a 0.5% contraction in the last three months of 2010, according to figures released by the Office for National Statistics (ONS).

The severe weather hit activity in the quarter, but the ONS said even if the weather impact had been excluded, activity would have been “flattish”.

The figures are set to raise concerns over prospects for the economy, with large public spending cuts expected to come in this year.

Despite the new findings, Ross Smith, Head of Policy and Research at the NECC, said: “This is disappointing news but it should be remembered that the bad weather had a particularly severe impact on the economy at the end of 2010.

“NECC’s own surveys of members show that sales and orders are growing in the North East, particularly among manufacturers and the private sector has laid the foundations for sustained growth in 2011.”

The reduction follows four straight quarters of growth and the contraction took economists by surprise, as forecasts had been for growth of between 0.2% and 0.6%.

The construction industry was a large contributor to the fall, with activity decreasing by 3.3% in the quarter.

Ian McCafferty, CBI Chief Economic Adviser, added: “Although the manufacturing sector continued to grow strongly, this was not enough to make up for the declines in these other sectors, which account for nearly a third of the economy.

“On these data it is far too early to conclude that the UK economy faces a serious double dip, and it will be some months before the true picture of its underlying performance becomes clear.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .