The latest economic data in the U.K. is painting a mixed picture of the economic recovery that has economists concerned over potential stagflation, according to The Daily Telegraph. The U.K.s gross domestic product is expected to have grown just 0.5% in the fourth quarter, continuing the slowdown from 1.1% growth in the second quarter even as unemployment rises and price pressure continues to increase. Alan Clarke of BNP Paribas said, I think it is going to be a pretty unpleasant mix of sluggish growth this year and uncomfortably high inflation.
The concern comes as austerity measures are poised to bite into economic growth, potentially limiting GDP growth in the coming quarter to as little as 0.1%, according to some economists. Meanwhile the British Chamber of Commerce has warned that unemployment is likely to rise by about 100,000 over the coming year, and the recoverys overall strength remains uneven, which means that raising interest rates to control inflation could jeopardize growth for the labor market and the economy as a whole.