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
    +3

    Comment number 479.

    how,suddenly?

  • rate this
    -16

    Comment number 478.

    Now is the time for radical change not of the'' Entitled Benefit Guzzling Pinko Break the Nation by borrowing Lib-Dem Liebore type''
    Real change ... No to slow Socialist death by Bankrupting the Nation.
    It going to happen anyway.. ! No Welfare, No free rides, for the Non-Productive.. Flat Rate Tax of 5 % across the board.. NOW.

  • rate this
    +7

    Comment number 477.

    Banks don't want to lend money to business any more (they're only interested in paper transactions rather than making real money available)so how did the Gov expect the private sector to 'fill the gap' created by Gov. cutbacks? I don't expect miracles, just realism. Politicians - stop listening to the rich and bankers and use your own brains - oh I forgot brain use by politicians is forbidden.

  • rate this
    +6

    Comment number 476.

    REENIE

    The politicians are not stupid, they just want you to think they are stupid.

    The government are just following orders and this is why the country is in such a mess. Things are going to get a whole lot worse and that is why the government are preparing for civil unrest.

    Watch Money Masters to find out who your government really works for.

    Its not about money, LAND, ASSETS,POWER, CONTROL

  • rate this
    +2

    Comment number 475.

    I wonder what the topic of discussion will be this Thursday on BBCQT?

  • rate this
    +1

    Comment number 474.

    449.
    juliecontrite
    5 Minutes ago
    Last similar recession was under Tory was in the 70s. Demolish everything without rebuilding you finish up with nothing.

    More manufacturing jobs were lost under the last Labour Government than under the previous Tory Government. Probably to do with Gordon trying to build an economy based on shopping.

  • rate this
    +1

    Comment number 473.

    What we need is an increase in consumption and consumer spending to get the economy moving again.

    Come on Francis Maude, how about stimulating a bit of panic buying: Time to start emailing !!!

  • rate this
    +4

    Comment number 472.

    440. "Tsunami of logic"- You do realise Hitler would completly agree with you? I've always worked hard with integruty in every job I've had, but I've never got rich. It's the politicians, owners & rich who've let the country down. Without proper regulation, people get screwed by the unscrupelous. Or havn't you noticed? Where did the banking crisis come from?

  • rate this
    +2

    Comment number 471.

    Even the phoney petrol crisis didn't prevent the economy going back into recession! The Tories were probably hoping that the increased takings at petrol stations in March would prevent contraction of the economy.

  • rate this
    +6

    Comment number 470.

    I hate to be the bearer of bad news but the days of continual growth based on cheap credit fuelled consumerism is over and no amount of temporary debt loaded stimuli is ever going to fix the UK economy.

    We need to look at the longer term, clear the deficit, pay off our debt and rebalance our economy. This certainly won't be achieved in a single parliament and it will probably take two or more.

  • rate this
    -1

    Comment number 469.

    Aren't we worrying just a bit too much about these growth figures?

    Any change of less than about 1% is negligable, esp. considering the difference an extra BH makes.

    According to the chart above, we've actually grown by 0.4% since Q2 2010 - which while hardly wonderful, is not what I would call a recession.

    Let's all just get on with it, and stop worrying so much about these minor fluctuations!

  • rate this
    +4

    Comment number 468.

    Gosh...what a surprise!

    Government strips public of all spare cash in taxes, no money in the pockets of people, the high street suffers, jobs are lost, economy slows..

  • rate this
    +5

    Comment number 467.

    Interesting that until the US economy began improving, news like this would cause a sharp drop in the FTSE100 etc. However since the US economy has improved and the Dow has risen, any bad news in Europe - Greece/Portugal/Spain etc doesn't seem so important. As I write the FTSE is UP just because the Dow is up. Just shows what a manipulative bunch of sheep the City boys are!

  • rate this
    +4

    Comment number 466.

    Banks run everything so nothing will change.Bankers are doing well, although they caused it all.Restructuring of financial services is needed if things will get better and also to prevent it all from happening again. In democratic nations governments are not supposed to be working for bankers, they are should to be working for the people.The modern cynics of politics find that idea outdated.

  • rate this
    +3

    Comment number 465.

    On the double dip recession. The Chancellor, George Osborne has said it is "disappointing.....Is that it? Is this his input? He must have seen this coming under his totally inept stewardship. Cameron for goodness sake prize this chumps hands off the economy! He has cut and cut to the detriment of job creation.

  • rate this
    +2

    Comment number 464.

    #430
    Lefties should feel good about this small, pedantic fact. They can now blame this one on the current government!

    Osborne was warned his economic policy would lead to a double-dip recession.

  • rate this
    +2

    Comment number 463.

    439. DozenMadderAnnieMore_PlanetBlowke_underhighwheel

    "You can't multiply wealth by dividing it" means if you have someone with £1M, take that from him and share it over 1M people, the £1 does not make those million rich, or even noticably better off.

  • rate this
    +7

    Comment number 462.

    I run a small business, employing 9 people. It makes me pretty cross when none of these guys in Whitehall have ever run business, and even if they have been "involved" at some level (usually as a result of Daddy or their school back-ground), its not been in the day to day management experincing cashflow problems, staffing and HR issues red tape etc..... I'm middle class, but it's time to change!

  • rate this
    +1

    Comment number 461.

    It finally happen... a double dip... so what. Is the world going to end? No - ordinary working people will just carry on trying to earn a wage, despite what the government does... It's harder to do these days, no doubt, but we stick at it and do a good job and get paid. Regardless of politicians etc of all types say and do (or don't do)

  • rate this
    +2

    Comment number 460.

    Once again these publicized figures nobody really understands (I know i don't!) create a self fulfilling prophecy of doom and gloom.
    Until this mornings news I was looking forward to boosting
    the economy by making a significant DIY purchase at the weekend.
    Well guess what.... that fence panel purchase has now been put on hold possibly into Quarter 3 and beyond, just cant take the risk.

 

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