UK Double-Dip Recession Deeper Than Feared
The UK double-dip recession is deeper than originally thought after revised figures showed a sharper decline in economic output during the first quarter of the year.
The Office for National Statistics (ONS) has revised downwards its first estimate of the fall in gross domestic product (GDP) of 0.2% during the first three months of the year to 0.3%.
It blamed weaker construction output for the poorer economic situation.
After a 0.2% decline in the final quarter of 2011, the new estimate confirms that the UK has entered a technical recession - two consecutive quarters of negative growth.
Ross Walker, RBS UK economist, told Sky News that if the construction sector, which saw a near 5% decline in output, was stripped out of the data the picture was not so bad.
But he warned: "The economy is still basically fairly flat."
Mr Walker, a member of the Sky News Money Panel, said the part of the economy that could drive a recovery, the corporate sector, was "sitting on cash" rather than making investments.
"A resolution of the euro crisis would help get business activity going again," he added.
The downward revision will heap more pressure on the Government and fuel criticism that Chancellor George Osborne's austerity measures are choking off the recovery.
It will also dash hopes that the figures could be revised upwards, possibly into positive territory, when a third estimate is released next month.
Sky News business correspondent Alistair Bunkall said: "Without doubt, this small revision and confirmation that the UK is in a double dip recession will add impetus to the Labour Party's accusation that the Government's strategy for the economy is the wrong one.
"However I don't think that in itself it is going to change the Government's resolve.
"But it will give them food for thought, equally so the Bank of England, which must now reconsider, in even stronger terms, a further round of Quantitative Easing."
The second estimate provides data for the expenditure side of the economy for the first time and revealed a slowdown in household spending, which increased by 0.1% in the first quarter, compared to 0.4% growth in the final quarter of last year.
Household spending declined for three quarters in a row last year and has been hit by high inflation, sluggish wage growth and soaring unemployment.
Unions and the Labour party used the revised figures to attack the Mr Osborne's economic policy.
TUC general secretary Brendan Barber said: "The Government is taking our economy in completely the wrong direction.
"Despite ministers' efforts to blame Europe for everything the truth is many of our problems are home grown, with consumer spending and construction both struggling under the weight of the Government's austerity programme."Shadow chancellor Ed Balls added: "What more evidence can David Cameron and George Osborne need that their policies have failed and that they now need a change of course and a plan B for growth and jobs?"
But Chloe Smith, economic secretary to the Treasury defended the Government's strategy under "very challenging circumstances".
"We have confirmation from the IMF and the OECD that our path is the right one for the present," she told Sky News.
The latest figures also showed Government spending surged 1.6% between January and March, the biggest rise since the first quarter of 2008, driven by spending on health and defence.
James Knightley, economist at ING, said the high levels of Government spending called the Chancellor's austerity measures into question, while Vicky Redwood, chief UK economist at Capital Economics, said Government support would not last.
She said: "Of course, the GDP figures could yet be revised back up again in the future.
"But with so many factors holding back the recovery, we still expect the economy to contract by about 0.5% this year as a whole."
Earlier in the week the International Monetary Fund warned that the eurozone crisis threatened to derail the UK's economic recovery and urged the Government to take action to boost growth and reduce unemployment.
The global financial watchdog recommended that the Government should find money to invest in infrastructure and even consider a temporary cut in VAT to bolster consumer demand.
The UK's position is in stark contrast to that of Germany.
Revised GDP figures for Europe's largest economy confirmed that Germany's economy grew by 0.5% in the first quarter of 2012.
what do you think?
Why was this unexpected and a shock to our MSM News? This was the only possible outcome from the path we have been taken down by our Leaders...
So its all the Construction Industry's fault? come on! If the fat cat bankers who caused the problem will not loan money to the companies that need to upgrade and rebuild how is that the fault of some poor little builder who is doing his best to stay afloat...... As usual the fat cat bankers are blaming everybody else but themselves for something they caused (aided and abetted by the government - not one particular party but the government at the time - they are all as bad as each other)
As Gordon Brown said "this is no time for amateurs".CaMORON, Clegg and Osbourn their Banker`s Friends are again destroying this country.
I used to think Anthony Barber or Norman Lamont were the No 1 pick for the UK's worst ever Chancellor, but I think all bets are now off, and if he hasn't achieved anything else, George Osbourne has at least secured No 1 spot on that list
Of course you all realise don't you....This is all Labour's fault.....zzzzzzzzzzzzzzzzzzzzzzzz
Saw Cameron on TV yesterday on PMQs calling Ed Balls a mumbling Idiot, the same man who he said if was like talking to someone with Tourettes, and sat behind him was his Chancellor cheering him on along with the other Tories. Cameron was told to apologise to Ed Balls and remove the word Idiot, he did neither but rephrased the answer gave containing Idiot. They have found out now we are deeper in recession than previously thought, who are the true Idiots? Also there were no libdems on the front bench yesterday, Clegg as usual gone awol as usual when the pressures on.
"Household spending declined for three quarters in a row last year and has been hit by high inflation, sluggish wage growth and soaring unemployment." As well as being the result of recession, the above is also keeping it going. A vicious circle. Mike Eaton, below, hit the nail on the head. The ONS are not objective.
Cameron is a multi millionaire, Osbourne is a multi millionaire, Gove is a multi millionaire, and on it goes to over three quarters of the cabinet. Their tragectory is: Eton (or another hideously exclusive school) Oxbridge, PR job via connections, Govt. Sorted.
I am all for helping people economically that need it. But there are better ways of doing it. Thinking you can understand the economy and all its complexities was described by Nobel Prize economist Friedrich Hayek as "the pretense of knowledge" His economic frameworks are based on the fact that no institution can tell what is best for the economy, so leave to individuals on where best to spend their money. Bring back free market economics!
Free market economics? Don't make me laugh. With free market policies, the banks that got us into this mess would have failed, rather than being bailed out (in a very non-free economics way) by government, and we'd be in a situation a hundred times worse than the hole we're in now.
I once used what was probably the best free and wild fishery in Europe. It was a well kept secret until someone decided it could be better if it was properly "managed". Result: within two years it was laid waste and now, 15 years later, it has still not recovered. There is a lesson there for all the politicians in Europe: the more you interfere in the market, trying to shape it to your will, the more you will destroy it.
no disrepect to mike eatons comment but to say all builders are poor and struggling does surprise me somewhat.sometimes when business is making a fortune they say there doing ok and when there making less they say they are poor.i dont think builders are generally poor people from what ive seen.far from it.has far has the news article i dont belive anything the government says.i belive markets are controlled by bribes to mps and underheaded dealing behind closed doors.just because most ot the uk population is struggling doesnt mean the government mps and the those it the top are.markets can be controlled to suit there agenda and whats makes them richer at the top at the expense off everyone else.the word corruption brings to mind
This coalition lot have just to go and go now! They are ruining our country.
It may be as well to remember the last labour government's inept handling of the Country that contributed to this mess. Mr Poole on here has a very short memory.
Yes Grany your quite right it was Labours fault!!!
Philip Smith, this mess would had happened irrespective of who was in government at the time. Its easy for the incumbant lot to blame Labour but they would have been in EXACTLY the same position. face facts, this governments policies are not working.
no wonder we are worse off because these pair of idiots in the so called government havent a clue and its not just labour to blame they shagging the country up more