British economy shrinks again in second quarter
BRITAIN’S ECONOMY shrank less than first feared in the second quarter, but remains stuck in a double-dip recession.
GDP fell by 0.5 per cent between April and June compared with the previous quarter, according to the Office for National Statistics (ONS).
The figure, which was in line with economists’ expectations, was revised from the 0.7 per cent decline statisticians had estimated last month.
However, the economy has been shrinking for three quarters in a row, its second recession in the last four years.
Bleak business surveys suggest it is unlikely to improve quickly, and the Bank of England estimates zero growth for this year as a whole. The chancellor, George Osborne, came under intense pressure to boost the economy this week when government borrowing showed a shock increase in July.
Consumer spending dropped by 0.4 per cent in the second quarter, while exports fell 1.7 per cent and imports climbed 1.4 per cent. Trade shaved 1 per cent off GDP, the biggest drag on growth since the second quarter of 1998.
Construction slumped by 3.9 per cent, less than first thought, but still a sharp fall. Manufacturing output was down 0.9 per cent, while the service sector shrank by 0.1 per cent.
The British treasury gave a cautious welcome to the upward revision, with a spokesman saying: “Britain is dealing with some very deep-rooted problems at home and a very serious debt crisis abroad, and that is why the healing of the economy is proving to be a slow and difficult process.
“Compared with two years ago, the deficit is down, inflation is down and there are more private sector jobs.”
However, Rachel Reeves, opposition Labour Party spokeswoman on treasury affairs, was not impressed. “Any small upward revision in growth figures is welcome, but our economy is still in the longest double-dip recession since the second World War, and that’s why borrowing so far this year has risen by a quarter compared to last year.
“David Cameron and George Osborne’s plan has badly failed. Since the spending review our economy has shrunk by 0.6 per cent. And with Britain just one of two G20 countries in a double-dip it is clear that this is a recession made in Downing Street.”
GDP is now around the same level as it was in the middle of 2010, so growth has been broadly flat over the last two years, the ONS said. However output is still more than 4 per cent below its pre-recession peak.
Economists argued that the figures did not alter the big picture of an economy struggling to return to growth.
Vicky Redwood, chief UK economist at Capital Economics, said: “Of course, the GDP figures may in the future be revised up further. Nonetheless, given the drags from the fiscal squeeze, euro zone crisis and high domestic debt levels, we still doubt that a strong recovery lies ahead.”
The Bank of England has estimated that the extra bank holiday in June knocked around 0.5 per cent off GDP during the second quarter.
Lee Hopley, chief economist at the EEF manufacturers’ group, said: “Whilst the revised estimate suggests the economic situation, particularly for manufacturing and construction, wasn’t quite a dire as first thought, there are clearly some big question marks around where we go from here.
“Even if activity was displaced rather than lost we’re still looking at an overall contraction for the economy this year.”
By comparison, Germany grew by 0.3 per cent between April and June, although weak manufacturing and services PMI figures released on Thursday suggest that even Europe’s economic powerhouse is going backwards in the current quarter. – (Guardian News Media 2012)