What the Experts Are Saying About the UK Economy

UK GDP ESTIMATE: A triple-dip recession could be on the cards, the UK is edging closer to losing its AAA rating, and yet markets hover around 5-year highs

Holly Cook 25 January, 2013 | 11:23AM

Numbers released by the Office for National Statistics on Friday morning revealed the UK economy shrank 0.3% in the final three months of 2012. Though this is only a preliminary estimate and is therefore subject to adjustment as more data comes through, it represents the fourth contraction in the last five quarters and is worse than many economists had expected. Economic growth was flat in the fourth quarter compared to the same period in the previous year.

Yet despite a consensus forecast of a contraction of 0.1% rather than the 0.3% announced today, the UK stock market remains in positive territory on the day and continues to hover around five-year highs. The implication is that investors are either not surprised by the number or they just don’t care. Indeed, there is a sense in the market that many have drawn a line under 2012 and are looking forward into 2013 with renewed optimism.

The FTSE 100 is currently trading within a few points of its level five years ago and yet this latest estimate shows GDP in 2012 was 2.3% lower than it was in 2007. If ever there was a tangible sign that economic growth does not necessarily equate to equity market performance, this is it.

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About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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