UK Economy In Double-Dip Recession

25 - 04 - 2012

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012. It is the UK’s first double dip recession since 1975.

A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011.

The UK economy was last in recession in 2009.

Prime Minister David Cameron said the figures were "very, very disappointing".
A sharp fall in construction output was behind the surprise contraction, according to the Office of National Statistics (ONS). In data based on a survey of 8,000 companies construction output decreased by 3%. This is the biggest drop since the start of 2009.
Industrial output also decreased by 0.4%.

It has been suggested that a fall in government spending contributed to the particularly large fall in the construction sector.

The output of the services sector, which includes retail, increased by 0.1% after falling a month earlier. Britain's service industries make up more than three-quarters of the economy. Growth was held back by a drop in output in the business services and finance sector.
Alan Clarke at Scotia bank said that the services output is perhaps ‘the most worrying element of this report’ and that construction proved “much less negative than feared”.
Leading economists have also questioned the reliability of the numbers given previous reports of growth in the construction sector. It is possible that the preliminary estimate may be revised upwards when more information becomes available.
Chris Williamson, Markit, said that the underlying strength of the economy is probably much “more robust than the figures suggest”.
Other recent business surveys, and reports of increased business optimism, also paint a more positive picture of the economy.
However, this preliminary figure suggests once again that the UK’s recovery will continue to be weak. The extra bank holiday for the Queen's Diamond Jubilee and disruption due to the 2012 Olympics are expected to reduce output and affect reports in the coming months.






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