In the final quarter of 2011, it appears as though there was a small percentage of growth in the portion of the economy that is considered to be the ‘non financial’ sector. Up from 10.8% in the third quarter of last year, the final three months saw a rise to 10.9% which is modest but at least shows some improvement.
As reported by the Office for National Statistics, they consider business activity to be ‘relatively robust’ even though economic times are difficult at the moment. It appears as though one-tenth of one percent is robust by their standards at the moment but even so, the fourth quarter of last year only closed out a bit above the 16 year low. In the third quarter of 2009, the low was at 10.6 percent and it is unclear how the ONS considers 10.9 to be ‘robust.’
Many analysts feel that profitability will be short termed because of the weakness in the current economy. One such economist is Howard Archer who is the UK chief economist of IHS Global Insight. His reasoning is that the economy will be held back by slow growth in sales and higher costs because of the rising prices in oil.
The main worry is that businesses will be reluctant to invest because of lack of profits and that they will also shed employees in order to cut operating costs even further. On the whole, manufacturing did not fare well as they were at a record low in the fourth quarter and even the services sector fell somewhat from 16.2% in the third quarter to 15.6% in the fourth. Given these statistics, many find it hard to believe the ONS is declaring economic growth ‘relatively robust.’