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Economic & Property Market Review Q1 2012

Report Authors: GVA

Report Summary:

The eurozone is suffering from a marked lack of effective decision making which is prolonging the crisis. Leaders are muddling through and moving slowly towards a tighter and more centrally controlled fiscal policy (needed for the euro to survive). But in the short term what is urgently needed is a much larger rescue fund to resolve the banking and sovereign debt crisis and an effective economic growth strategy. This delay, coupled with austerity programmes in many countries, is pushing the euro zone back into recession.

These concerns have affected UK business confidence and, together with high inflation, negative real income growth and our own severe austerity programme, have caused a UK GDP decline of 0.2% in Q4. This compares with an increase of 0.6% in Q3, as the first chart shows. Growth in 2011 overall was a very weak 0.9%, compared to 2.1% in 2010.

The weakest sector in Q4 was Production (-1.2%), followed by Construction (-0.5%) and the service sector (zero overall growth). Within services the largest relative slowdown was in business services and finance where strong growth of 1.2% in Q3 reduced to zero in Q4. The one services sub-sector that saw growth in Q4 was, surprisingly, Government and other services, where output increased by 0.4%.

Unemployment increased by 118,000 in the three months to November bringing the rate up to 8.4%, as the economically active population rose more than total employment. Encouragingly for the property market, employment growth moved into positive territory in the three months to November, although the increase was by only 12,000, but this was a noticeable improvement from the steep declines a few months ago.

About the Author:

GVA’s award winning Research team provides high quality research and analysis to the business and its clients. Our market commentaries, thought leadership pieces and consultancy advice drive industry debate, distinguish GVA from its competitors, and add value for our clients.