Reply #4: U.K. Growth Fueled by Jump in Government Spending [View All]

[T_i_B]

Trouble is, state spending has been the thing that kept the UK economy going when the private sector got credit crunched.

http://www.bloomberg.com/news/2010-09-28/u-k-grows-at-fastest-pace-in-nine-years-fueled-by-government-spending.html

The U.K. economy’s fastest quarter of growth in nine years was fuelled by rebounding consumer spending and inventories and the biggest jump in government spending since 2008.

Gross domestic product expanded 1.2 percent in the three months through June from the first quarter, unrevised from a previous measurement, the Office for National Statistics said today in London.

The International Monetary Fund yesterday cut its 2011 economic growth forecast for the U.K. and said the Bank of England should be ready to add more stimulus if the recovery falters. Britain faces the prospect of the biggest spending cuts since World War II to tackle its record budget deficit.

“The more the contribution of government now, the more we’re going to miss it when it’s taken away,” Peter Dixon, an economist at Commerzbank AG in London, said in a telephone interview. “We’re going to see much slower growth.”