UK economy: mixed messages on jobs and growth
Mon, 13 Feb 2012
Mixed messages have emerged about the strength of the UK economy after a raft of reports and surveys issued today.
Employers’ organisation, the CBI, says it expects the economy to avoid a double-dip recession this year.
However, with unemployment a lagging indicator, and growth expected to be weak, the CIPD (Chartered Institute of Personnel and Development) says the jobs market is facing the most difficult quarter since the recession.
Despite its relative optimism, the CBI has cut its 2012 growth forecasts for a fifth time.
The business lobbying group says it now expects gross domestic product (GDP) to increase by just 0.9%, down from the 1.2% growth it forecast in November. The CBI has also lowered its prediction for 2013, from 2.2% to 2%.
“Economic conditions will continue to be tough, especially in the first half of the year and the UK recovery will depend on the successful resolution of the Eurozone crisis,” says director general John Cridland.
“Weak wage growth and high levels of unemployment will continue to be a brake on household spending.”
The CBI expects growth will gather pace in the second half of the year, but warns that it will remain fragile because of the Eurozone crisis.
The CIPD says the labour market is at its weakest since the recession in 2009. In its survey, it found the difference between the number of employers intending to hire new staff and those planning on cutting staff had widened to its highest level since 2009.
The CIPD’s index of hiring sentiment fell to -8 from -3. Any negative number indicates more employers plan to lay off workers than hire them.
Consequently, the CIPD warns that unemployment could hit 2.85m.
Accountancy firm BDO’s survey of companies’ turnover added to the CIPD’s pessimism. Its output index fell from 92.5 to 91.5 in January. Any figure below 95 indicates contraction
“Undoubtedly, prospects for growth continue to be fragile - as the UK has already very likely entered a technical recession and the situation in the Eurozone remains difficult to predict,” says BDO partner Peter Hemington.
More optimistically, the January Bank of Scotland PMI report pointed to further increases in output, new business and employment in Scotland’s private sector economy.
At 51.4 in January, up from 51.2 in December, the Bank of Scotland PMI – a seasonally adjusted index monitoring activity across Scotland’s manufacturing and service industries – showed a moderate and slightly quicker increase in output at Scottish firms.
Growth was underpinned by a rise in service sector activity, as goods production fell marginally on the month.
Donald MacRae, chief economist at Bank of Scotland, says: “The January PMI edged upwards suggesting the private sector of the Scottish economy continues to show modest growth. The first increase in new orders at manufacturers for five months was particularly encouraging”