The economy grew by 0.6% in the second quarter and, with positive employment, consumer confidence and manufacturing data emerging, pundits claim the UK could be edging towards a recovery. Retail Week looks at the evidence.

Signs of a recovery…

  • GDP - Today the Office for National Statistics (ONS) revealed a 0.6% GDP increase in the second quarter as output grew in the construction, manufacturing and service sectors. It is an improvement from the first quarter when GDP edged up 0.3%, and a positive sign that growth is accelerating.
  • Unemployment - The number of people out of work fell by 57,000 to 2.5 million in the three months to May, representing a 0.2% fall to 7.8%, according to the ONS. Before the recession hit, the unemployment rate was more than 5%, equating to 1.6 million. The British Retail Consortium (BRC) said today that retail employment recorded its best performance in the second quarter in four years as it rose 3.7%.
  • Interest rates - They are at a record low level of 0.5%, easing the pressures on borrowing and therefore boosting spending.
  • Housing transactions - In March, housing transactions reached their highest level in two-and-a-half years as buyers took advantage of record low interest rates. Meanwhile, in July, the Royal Institution of Chartered Surveyors recorded the strongest month for house prices since January 2010 as 21% more chartered surveyors reported house price rises than falls.
  • Consumer confidence - In June, consumer confidence grew to its highest level in two years, and shoppers began buying large goods again, according to the GfK Consumer Confidence Barometer.
  • Exports - Export activity in the second quarter has reached levels not seen since before the financial crisis, the British Chambers of Commerce revealed this week. Export orders for service firms hit a record high, while 42% of manufacturing firms reported higher export sales.
  • Retail sales - In June, retail sales increased 2.2% year on year and edged up 0.2% month on month, according to the ONS, as shoppers enjoyed the warmer weather and started spending more.

… but it’s not all rosy

  • Economic growth - The move from recession to growth has been the slowest in more than 100 years - worse than the Great Depression - and the economy is still 3.3% smaller than its peak level before the recession. The third and fourth quarters must continue to show growth for the UK to be experiencing a real recovery.
  • Bank lending - The stock of lending to small, medium and large businesses was negative in the three months to May, contracting by £4.5bn in the period. This puts pressure on businesses and their investment strategies. It undermines any sustained recovery, leading some pundits to claim that recent good news on the economy is being led by consumer activity rather than a marked improvement in the health of British industries.
  • Interest rates - There are question marks over the sustainability of low interest rates and whether they are fuelling an artificial recovery. Low interest rates also deter people from saving.
  • Consumer confidence - The index may be on the up but confidence is still fragile. Analysts fear it could be easily shattered by any additional bad news relating to the economy, including further failures of weak countries in the Eurozone.