UK economic recovery may be ‘dead cat bounce’

 The UK economy has shown 1% growth in the last quarter after nine months of recession, but analysts are unsure whether this represents a true recovery.

The slight upturn in gross domestic product (GDP) falls far short of a return to the output levels seen before the financial crisis of 2008.

The Olympics are thought to have given the UK economy a temporary boost alongside the automatic ‘dead cat bounce’ following a steep decline.

The term ‘dead cat bounce’ comes from a saying in the financial sector: Even a dead cat will bounce if it you drop it far enough.

According to the Office for National Statistics, the UK’s GDP increased by 1% between July and September after falling by 1.1% in the previous three months.

However, the ONS noted, this included a 0.2% boost due to Olympic ticket sales, with further benefits from hotel and restaurant activity and temporary jobs.

In addition, the preceding three months had been unexpectedly difficult due to bad weather and the Jubilee public holiday.

The emphasis placed on these minor factors underline the absence of major dynamic change in the UK economy.

“While the news is positive, the estimate must be put in context,” said David Kern, Chief Economist at the British Chambers of Commerce. “Compared to a year earlier, the figures show that the economy is stagnant.”

Richard Halstead, Midlands Region Director at EEF (a manufacturers’ organisation), likewise warned: “With survey data, particularly in our major markets, pointing to difficult trading conditions in recent months, it’s unlikely this pace of expansion will be maintained into the New Year.”

In the last quarter, the production sector grew by 1.1% – an encouraging figure for the pharmaceutical industry.