Britain’s recovery from recession is turning out to be an uneven one and the government is still waiting for the shift to an export- driven economy it vowed after the financial crisis.
Manufacturing shrank in May at its fastest pace since January, and the country’s trade deficit was its widest in six months, according to official data yesterday that tempered signs growth was starting to pick up speed.
But three surveys published a few hours earlier showed rising house prices, improved business confidence, and steady growth in retail sales.
And the IMF raised its projection for growth to 0.9% this year, up 0.3%.
The different pace of recovery in different parts of the economy may be a consequence of the emergency stimulus measures taken by the Bank of England and the government, which have included support the housing market.
In 2011, finance minister George Osborne spoke of “a Britain carried aloft by the march of the makers” as he stressed the need to rebalance the economy away from reliance on public and private debt and towards manufacturing.
Nonetheless, a combination of the eurozone crisis and the government’s austerity push have left Britain still largely reliant on consumer spending, much of which is financed by credit.
Manufacturing shrank by 0.8% in May from April, the Office for National Statistics said, much weaker than forecasts for a 0.3% rise in a Reuters poll.
Output in the overall industrial sector was also weaker than expected as it came in unchanged from April.
“With the UK consumption outlook more positive as a result of the apparent turn-around in the housing market, the risks in the UK seem somewhat tilted to an old-school recovery built on consumer spending sucking in imports,” said David Tinsley, UK economist at BNP Paribas.
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