According to a recent report by the British Chambers of Commerce (BCC), the UK economy has managed to avoid slipping back into a “double-dip” recession in the first quarter of 2010.
The report suggests that the economy was kept afloat by a strongly performing service sector, far outstripping many other business sectors.
Manufacturing had the worst outlook in the first quarter and presented the biggest risk of the economy falling back into recession. However, towards the end of the first quarter the Purchasing Managers Index (PMI) indicated an increase in activity at the fastest rate in 15 years.
Despite this promising indicator of economic growth in the UK, many city analysts have
suggested that the current rate of growth is still relatively weak and it would not take
much for our economic recovery to be jeapordised.
David Kern, the BCC’s Chief Economist, commented:
“A fragile recovery is now under way, but the upturn must be nurtured to counter risks
of a relapse. Despite the upward revision to GDP in the fourth quarter of 2009, and the prospect of positive growth in the first quarter of this year, the economy remains weak and vulnerable to a setback. Businesses remain under pressure and there is absolutely no room for complacency.
“It would be wrong to contemplate raising interest rates or reducing QE at present. Given the dangers still facing the economy, it is important that the MPC perseveres with an expansionary strategy. Threats of a double-dip recession remain more serious in the near future than risks of higher inflation.”