Money

Reaction to GDP figures

Kent’s company directors say they are currently “cautiously optimistic” about the economy – despite the worse than expected Gross Domestic Product figure.

Commenting on the latest GDP figures, which showed a decline of 0.2 per cent in the fourth quarter of 2011, Andrew Metcalf, vice chairman of the Institute of Directors’ Kent branch, said: “While the national statistics show cause for concern we feel the GDP figures for October-December may not accurately reflect the economic situation in Kent as the feedback we are receiving from our members gives us reason to be cautiously optimistic.

“At our recent IoD Kent MD (Managing Directors) Strategy Forum the consensus from delegates was one of growing confidence this quarter as business builds strongly in January.

“There was also a widespread recognition that the Kent business community has to make thing happen for itself, investing time and effort in building partnerships and links across the county and beyond.”

But other economists remain cautious and have warned that economy could continue to shrink in the early part of this year – causing the first double dip recession in the UK since the 1970s.

Graeme Leach, chief economist at the Institute of Directors, said: “The tightrope walk between recession and recovery continues. We’ve taken one step towards a double-dip recession, and it’s now probably 50-50 as to whether we’ll take the second, with a fall in output this quarter as well.

“It’s important to stress that the 0.2 per cent fall in GDP is not large and could be reversed as QE2 (the second stage of quantitative easing which enables firms to borrow money more easily) works through the economy.

“But even if output does increase in Q1 we’ll continue to experience the feel-bad jobless recovery for some time yet. Indeed, the combination of falling output and today’s MPC (Monetary Policy Committee) minutes suggest QE2 could be further expanded in February.

“The tipping point for recession or recovery remains economic developments in the eurozone. If the euro crisis gets worse, sustaining UK recovery looks almost impossible.”

At the World Economic Forum in Davos Prime Minister David Cameron told national leaders they need to take strong and decisive action to avoid a worsening crisis for both Britain and the members of the Eurozone.

He said: “Tinkering here and there and hoping we’ll drift to a solution simply won’t cut it anymore.”