UK economy in double-dip recession

 

'Everything is going up in the shops and wages aren't'

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012.

A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.

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

BBC economics editor Stephanie Flanders says it "adds to the picture that the economy is bumping along the bottom".

She said economic output was slightly smaller now than it was in the autumn of 2010.

Wednesday's figure is an early estimate and is subject to at least two further revisions in the coming months. It is compiled using 40% of the data gathered for later revisions.

The UK economy was last in recession in 2009.

'Catastrophic'

Prime Minister David Cameron said the figures were "very, very disappointing".

Ed Miliband: "Arrogant, posh boys just don't get it"

"I don't seek to excuse them, I don't seek to try to explain them away," he said at Prime Minister's Questions.

"There is no complacency at all in this government in dealing with what is a very tough situation, which frankly has just got tougher."

He said it was "painstaking, difficult" work, but the government would stick with its plans and do "everything we can" to generate growth.

Labour leader Ed Miliband said the figures were "catastrophic" and asked Mr Cameron what his excuse was.

"This is a recession made by him and the chancellor in Downing Street. It is his catastrophic economic policy that has landed us back in recession," Mr Miliband said.

Construction questions

The ONS said output of the production industries decreased by 0.4%, construction decreased by 3%. Output of the services sector, which includes retail, increased by 0.1%, after falling a month earlier.

These figures are slightly worse than many expected, but the fact that the UK is now technically back in recession should not detract from the underlying reality, which is very much as predicted.

The UK economy has been bumping along the bottom for more than a year and is still struggling to gain momentum.

Many have questioned the dire numbers for the construction sector, which accounts for less than 7% of the economy, but has done much to pull the GDP figure into negative territory.

The sharp fall in output from the production sector is also at odds with recent business surveys (though manufacturing has not fallen as the sector overall).

However, this preliminary figure is consistent with the message coming from official and private data - that the UK was once again relying heavily on services and consumption by households. That suggests the recovery will continue to be weak, though whether we will see further quarters of negative growth is very much an open question.

It added that a fall in government spending had contributed to the particularly large fall in the construction sector.

"The huge cuts to public spending - 25% in public sector housing and 24% in public non-housing and with a further 10% cuts to both anticipated for 2013 - have left a hole too big for other sectors to fill," said Judy Lowe, deputy chairman of industry body CITB-ConstructionSkills, said.

Some have questioned the validity of the ONS's figures, particularly on the construction industry, which has been particularly volatile in recent quarters.

But Joe Grice, chief economic adviser to the ONS, said the construction data was based on a survey of 8,000 companies and had been carefully checked and double checked.

The latest figures supported the view that the economy had been "flattish" in the past few quarters, he added.

Over the last year and a half, the economy has fluctuated between quarters of growth and contraction.

Bank of England governor Sir Mervyn King has previously warned that the economy will continue to "zig zag" this year.

He had forecast growth in the first quarter but then a contraction in the second quarter, when the extra bank holiday for the Queen's Diamond Jubilee is expected to reduce output.

'At odds'

"It is clearly not good news, the missing link in the economy has been confidence," said Graeme Leach, chief economist at the Institute of Directors told BBC News.

"We're part of a very strong automotive sector," says Midlands car parts maker Lander Automotive

"These are relatively small falls, so we shouldn't be too alarmist.

"[But] regardless of the figures, it is the message that comes out to business - to be cautious - exactly when we want them to be a little more aggressive in terms of recruitment and investment."

However, some pointed to other recent business surveys, which painted a more positive picture of the economy.

"These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism," said David Kern, chief economist at the British Chambers of Commerce.

He added that he expected the preliminary estimate to be revised upwards when more information became available.

The estimate for construction output is based on published data for the first two months of the quarter, and an estimation for the third month.

But the ONS pointed out that, while there was "a tendency for upward revisions" to construction, March would need to be "exceptionally strong" in the construction sector to produce growth in the quarter.

The first estimate of GDP for the last three months of 2011 showed a contraction of 0.2%, which was later revised to a contraction of 0.3%.

 

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  • rate this
    -1

    Comment number 359.

    test

  • Comment number 358.

    All this user's posts have been removed.Why?

  • rate this
    +3

    Comment number 357.

    All this is people playing with numbers.

    What is really important to understand is that our economy is being run for the benefit of the richest people in society by two posh boys who have neither knowledge of nor concern for the lives of the majority.

  • rate this
    0

    Comment number 356.

    Why are we so abundantly believing that this whole system of money is the only thing we have to abide by? when the banks create money out of nothing which provides a false economic representation to all of us, the people! surely to have a monitory system that works in positives rather than negatives and debt is morally and socially better for all, this debt driven slate needs to be wiped clean NOW

  • rate this
    +2

    Comment number 355.

    I have every confidence that this governments policies and proposals will continue to improve the united kingdoms financial standing and recovery, and so commend this budget to the house. So what now, do the arrogant little rich boys go and stamp their feed in the corner, or go away and dream up more silly ways to bleed us dry, as if there is anything left.

  • rate this
    -1

    Comment number 354.

    Ahh.... Labour voters out in force with the usual answer of spend more and repay later.

    How long do people think it will take to sort out 13 years of mis-management and overspend? A lot more than 2 years.

    And as for the ideologists.....why did it take until 3 weeks before an election for the top rate of tax to be increased when the country started plunging 2 years previously?

  • rate this
    +2

    Comment number 353.

    The economy is stagnant.The Government has taken billions out of the economy, made redundancies, increased taxes and done nothing to stimulate growth. Furthermore their leadership style has not been a positive one, just like ti encouraged motorists to panic buy it's gloomy approach to the problem has caused industry to consolidate. The economy needs a boost, the Governemnt hasnt got it in them

  • rate this
    +1

    Comment number 352.

    #333 so who has gained out of your 10 fold house price increase?..just you...the rest of us have to pay the stupid house prices that you have help create.

  • rate this
    +4

    Comment number 351.

    So who we blaming this time? Labour or Europe or both and lets chuck in the Americans and Chinese for a side order of blame. I think the words we told you so spring to mind. Still I guess it isnt obvious what will happen when you chuck millions of people on the dole and tell everyone we are staring down the barrel of a gun. That gun is now howitzer sized Dave. Pasty anyone?

  • rate this
    +3

    Comment number 350.

    This sorry concocted govt of rich kids are stumbling from one disaster to another, coupled with a rip off budget that leant toward millionaires, 2 years of smashing the working classes whilst bankers toss themselves £million bonuses and today in between further scandals their ship of economics sank but hey no worries do you want to borrow £10 billion No wonder Clegg looks like he's on death row!

  • rate this
    0

    Comment number 349.

    Hows does that song go again.....

    oh yeah..

    'money money money....it's always Sunny ..in the rich mans world'

    It's such a holocene nowadays

    ''They desecrate the winter 1979
    Capital collateral. Brooding duplicitous wicked and able media-ready
    Heartless and labeled''

    http://www.youtube.com/watch?v=XTeh4ziH8ak

  • rate this
    +4

    Comment number 348.

    It is clear this Govt has little understanding of why the economy is in recession and more importantly has no ideas how to stimulate it. London has benefitted greatly with the Olympics and now that construction programme has come to and end, so has the activity in the economy.

    The crtics who point to the 'school boys' running the Govt are right.

  • rate this
    +1

    Comment number 347.

    307.bobloblaw14
    7 Minutes ag


    Debt slavery is almost upon us.

    ===

    That arrive a long time ago.

    http://www.telegraph.co.uk/finance/comment/jeffrandall/8859082/The-debt-trap-time-bomb.html

  • rate this
    -1

    Comment number 346.

    323.
    Andy_Pandy
    ___

    Given that in the conservative 2011 party conference, it was revealed that the conservatives expect to borrow around £500 billion over the parliament, they also have no qualifications to comment about a debt crisis. They are as complicit as labour, always have been, and always will be. Take a step out of the blue bubble. The party political system is a smokescreen!

  • rate this
    0

    Comment number 345.

    I do remember the British steel industry costing the taxpayer £1m a day back in the early 1980s. The West priced itself out of world markets - and we're still being undercut by people willing to do the job for what we rightly consider very low wages. So by what socialist magic are we going to get the manufacturing back - order people to buy our stuff at gunpoint? Force competitors to charge more?

  • rate this
    0

    Comment number 344.

    Opposition politicians and economic "experts" like Stephanie Flanders produce hysterical comments about "catastrophe" and "bumping along the bottom".
    Per-capita consumption in this country is amongst the highest in the world, with wastage of food worth billions of £ every year. Nobody is dying in the streets from starvation.
    Borrowing more so that we can consume and waste more is not necessary.

  • rate this
    +2

    Comment number 343.

    If this BBC report is accurate then its time to plug the hole in the dyke and stop throwing money away.

    We could save £18 Billion over two years simply stopping sending money to the EU. We need this money here and we shouldnt be lining coffers and pockets in Brussells.

    What do we get for it? Hordes of Eastern European beggars if the other BBC report is also accurate...

    Stop wasting our money!

  • rate this
    +1

    Comment number 342.

    When will the ordinary UK citizen wake up and realise that "protecting our interests" hasn't included the majority of us for decades? We've been betrayed into destitution by the last few governments and not one of those parties deserves our support for as long again. It's time we got rid of our political dinosaurs and allowed something more warm-blooded a shot at government.

  • rate this
    +3

    Comment number 341.

    313.pigsdofly - The government do nothing but lie and will not save anybody but themselves.What worries me is that the tories will be subsitutued for labour at the next election...whats the point?Labour and tory front benchers are all in the same team behind the scenes. That nonsense that goes on in the house of commons, they appear to argue but when they get in to power they are exactly the same

  • rate this
    -1

    Comment number 340.

    Lets make a lot more jobsworths in the public sector. Paid from the same pot as benefits. Must have degree so they can be posh benefits and paid a lot with a great pension. Then they can spend some money in the retail sector on new TV's from China. and cars from Japan. (Labours plan) That will really help

 

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