(26th January 2011 – UK) Official data released in the United Kingdom tells a story of economic growth and a faltering recovery which retracted in the last three months of 2010.The Independent newspaper reported the news shocked economists in the UK, particularly as inflation is set to accelerate, threatening a return to the “stagflation” of the 1970’s.
The governor of the Bank of England, Mervyn King, said in a speech in Newcastle that inflation would reach “uncomfortably high” levels this year.
Mr King said that inflation would peak at between ” 4 and 5 percent” before falling back next year.
Mr King also noted that unless there was pay restraint, interest rates would rise rapidly.
Mr King also said that unless there was pay restraint, interest rates would quickly be raised.
The Office for National Statistics (ONS) said that most of the 0.5 percent fall in output recorded between October and December was down to the extreme weather in the final weeks of the year – but that still implies an otherwise ‘flattish’ economy unable to grow, and is way below expectations of continuing, albeit modest, growth.
The figures, described by the Chancellor George Osborne as ‘disappointing’, raise fears of a ‘double-dip’ recession which would be bad news for jobs, the public finances and the housing market.
The news also sent sterling and the stock market tumbling yesterday.