View the article online at http://citywire.co.uk/money/article/a591439
UK recession deeper than first estimated
The UK economy contracted by 0.3% in the first three months of 2012.
The UK economy contracted even more than first estimated in the first three months of 2012, with revised GDP figures showing a decline of 0.3%.
Data from the Office for National Statistics (ONS) confirm that the UK entered a double-dip recession, having also contracted by 0.3% in the last three months of 2011.
The first reading of GDP for the first quarter of the year had indicated -0.2% growth, but this figure was much disputed by economists, who pointed to more upbeat business survey data.
Two consecutive quarters of negative growth meet the technical definition of recession.
The economic weakness will add fuel to the debate about the extent of the Coalition government's ongoing austerity measures. However, the publication from the ONS today showed that government spending increased by 1.6% in the first quarter of 2012, compared with an increase of 0.5% in the previous three months, raising questions about the extent of chancellor George Osborne's cost-cutting drive.
The figures also provide more justification for the Bank of England to extend its quantitative easing programme amid falling inflation. At its last meeting in May the Bank's monetary policy committee voted against further bond purchases, but the programme could be extended beyond £325 billion in the future.
Economists expect a return to economic growth in the second half of the year, but this is dependent on events in the eurozone where a slew of negative data today has raised concerns about the weakness of the bloc. The loss of a working day due to the Queen’s Diamond Jubilee will also constrain growth.
The ONS often changes its GDP figures in subsequent revisions. It warned today: 'Expectations of accuracy and reliability in early estimates are often too high.'
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by Gavin Lumsden on Mar 07, 2014 at 18:53