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Britain out in the cold as US exits recession

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Anonymous Coward
User ID: 753330
10/29/2009 11:10 AM
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Britain out in the cold as US exits recession

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Gordon Brown is facing growing embarrassment over Britain’s recovery after it became the world’s only major economy still in recession as America returned to growth in the third quarter.

US gross domestic product (GDP), a key measure of a country's economic strength, grew by 3.5 per cent between July and September — at the top end of economists’ forecasts.

America joins Japan, China, Germany and France as the world’s leading economies that have emerged from recession.

Britain, the world’s sixth largest economy according to the World Bank, was widely expected to have recovered in the third quarter.
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However, shock figures, released last week, showed that the UK economy contracted between July and September, leaving the country battling the longest recession on record.

GDP fell at a quarterly rate of 0.4 per cent, confounding analyst's expectations of a 0.2 per cent rise, though some economists said that the figures could be revised up in the coming months.

Today’s figures from America, and the impact on Britain’s standing compared to its peers, pile further pressure on Mr Brown ahead of a general election next year.

In September, Mr Brown had been upbeat on the country’s prospects of emerging from recession after pumping billions of taxpayers money into bailing out financial institutions.

He said: “We are now coming out of recession as a result of the actions that we have taken. I think you will see figures pretty soon that show the action that Britain has taken yielding effect.”

Last week, after Britain's GDP figures emerged, Mr Brown said that the country would be out of recession by the end of the year.

The upbeat data from the US, which reverses the 0.7 per cent contraction between April and June, means an end to its deepest recession for 70 years. The Dow Jones industrial average rose 77.60 points to 9,840.38.

However, some economists raised concern about whether the pace of growth was sustainable once the Government withdraws economic support.

Commenting on America’s figures, Bart van Ark, chief economist of The Conference Board, said: "The expansion in the third quarter shows we have clearly begun to emerge from the trough.

“But there's still a long way to go, and we still don't know enough about the sustainability of these recovery signals."

The third quarter recovery was generally broad based, with gains in consumer spending, exports and investment in home-construction.

Consumer spending, which accounts for over two-thirds of US economic activity, surged by 3.4 per cent in the third quarter, the fastest advance since the first quarter of 2007.

However, the downturn has taken a heavy toll on employment in the US. Some 7.6 million people have been laid off since the recession began, taking the total number of unemployed to 15.1 million.

Following the release of the GDP figures, Timothy Geithner, the US Treasury Secretary, said that the recession was “alive and acute” for millions of Americans.

Christina Romer, chairwoman of the White House Council of Economic Advisers, said today: "The turnaround in crucial labor market indicators, such as employment and the unemployment rate, typically occurs after the turnaround in GDP.

“... it will take sustained, robust GDP growth to bring the unemployment rate down substantially.”

Of the world's largest economies, China last week declared that their economy grew at an annual pace of 3.5 per cent in the third quarter, while Japan registered quarterly growth of 0.6 per cent between July and September.

The French and German economies both grew by 0.3 per cent on a quarterly basis.

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