The British economy barely grew between April and June.
As industrial output shrank, GDP expanded by just 0.2 percent from the first three months of the year. That took the annual growth rate to 0.7 percent
The figures cast doubt on the government’s ability to cut the budget deficit with austerity measures.
Finance minister George Osborne blamed temporary factors — like lost productivity due to the Royal Wedding — and insists the UK is doing better than many others: “There’s enormous instability in the euro area, there’s a big argument in the United States at the moment about debt and here in Britain we’ve got a plan that has provided stability in a very unstable world and has brought our interest rates down and, you know, that has helped the economy grow.”
Some experts question his assessment: “We were somehow promised this double mantra of cutting debt but also miraculously sustained and ever rising economic growth — it’s in a dream world that you can achieve these things,” said Jonathan Tonge, professor of politics at the University of Liverpool.
Given the weakness of the economy, analysts said the Bank of England will likely keep interest rates at a record low for at least several more months despite high inflation.
But with inflation running above four percent, its not thought the UK central bank will try any more stimulus measures — such as printing money to buy back government bonds.
Britain’s consumers are suffering the worst income squeeze for 30 years with soaring food and fuel prices, higher taxes and slow wage increases.