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
    +5

    Comment number 379.

    'The Chancellor, George Osborne has said it is "disappointing" that the UK has dipped back into recession.'
    Oh good, glad to see he understands the gravity of the situation - like he is in danger of losing his income and home, (goes along the same lines as "average wage in the UK is 36,000 p/a" because that is statistically untrue in any part of the country except London...

  • rate this
    -1

    Comment number 378.

    Makes me laugh at the lefties blaming all this on class. How ignorant.

    The top 10% of UK earners pay HALF of all income tax to the country. Yep, those greedy high earners (Tories I imagine but don't mention class to Labourites). Don't believe me? Have a look at this BBC link.

    http://news.bbc.co.uk/2/hi/8417205.stm

  • rate this
    +2

    Comment number 377.

    75.thegeneralpublic
    Looks like Labour's legacy still haunting us. It'll take years to sort out the mess they made.
    -#-
    Haunting? Still,..?
    Dear oh dear…see an exorcist.

  • Comment number 376.

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

  • rate this
    +4

    Comment number 375.

    The many outweigh the needs of the few or the one.

    The 99% many: struggling to make ends meet, cutting back on everything.

    The 1% rich: £10 mil earned, £1 mil spent, £9 mil in the bank.

    The one or the few outweigh the needs of the many.

    This is the reason why the economy is going backwards.

  • rate this
    0

    Comment number 374.

    Maybe the muppets in charge should try and target the fall in fuel prices that should help people get up and about. You barely squeeze the trigger and its a tenner nowadays!!! People avoid going anywhere nowadays due to the instant tenner it costs you to go out!

  • rate this
    +1

    Comment number 373.

    Before the last election I remember David Cameron constantly referring to the 2009 recession as 'Labours Recession', despite the fact that it was actually a global recession.

    I wonder how he'll refer to this one - which has been caused mainly by the coalition governments shambolic and misguided economic policy.

  • rate this
    0

    Comment number 372.

    A lot of past 'growth' was an illusion created on the back of borrowed money.
    If we borrow less now then growth will slow or become negative but surely that is just an unwinding of the false prosperity created until 2008? Per capitat gdp has been flat for about 10 years.
    I'm worried that those who advocate more spending pay little in the way of tax so dont mind if taxes go up to pay for it.

  • rate this
    +2

    Comment number 371.

    345 barfbaby,
    "So by what socialist magic are we going to get the manufacturing back"

    Well we can use devaluation rather than austerity which in turn would make our exports more attractive, whilst compensating the poorest with higher minimum wages, higher govt spending and creating more jobs.

  • rate this
    +4

    Comment number 370.

    I note the pro-Coalition BBC has already got its line of "it's all the fault of the Eurozone". Not so. We had any economy that was growing in the last quarter of the Labour government and in the first quarter of the Tory-led coalition (accepted by all economists and analysts as still the result of Labour policies to boost the economy). Unemployment was also falling under Labour.

  • rate this
    -1

    Comment number 369.

    The government and banks have a lot of blame to shoulder, but let's not forget the spending spree the public have been on in the last ten years before the recession. If we were ALL more responsible, maybe things would not be so bad. You just need to look at countries with a more conservative borrowing culture and where they are in the recovery process to see this holds true

  • rate this
    -1

    Comment number 368.

    Once again this is just the media trying to make the worst out of everything.

    WE ARE NOT IN A DOUBLE DIP RECESSION.

    The definition of a double dip is

    "When gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth"

    Since the last recession, the UK has had 5 consecutive positive growth quarters in 2009/10.

    This quite simply is a new recession.

  • rate this
    +3

    Comment number 367.

    Simple lesson in economics: The health of the economy is determined by the flow of money through the system. QE puts money into bank vaults and then into foreign trusts . If the government really wanted the recession to end they would give money to ordinary people who would spend in this country.
    ===
    Ball's idea to cut VAT would do precisely this. Giving tax cuts to millionaires doesn't

  • rate this
    +1

    Comment number 366.

    We can have a real economy in which producers are rewarded for their production or a parasite economy in which people who buy up the available real estate are rewarded for doing nothing but causing raised costs and banking havoc. Unfortunately, You can't have both at the same time and the UK public keeps voting for the latter. See you at the next big recession (2026)

  • rate this
    -2

    Comment number 365.

    This is a very small contraction and it comes as a surprise to me. Our manufacturing company has seen both enquireies and sales rise every month this year in every sector we are involved in. Leave the everything as it is as confidence is returning slowly (although the media would have us belive that it isnt) and growth will come.

  • rate this
    -2

    Comment number 364.

    free fuel for all. I phink me starts learning an alien language. Speech of flight for the fun of it. And then some manoeuvrerboard. Sun in shadows, feelers on. Knight-in-Gale seize no nothing. Or has ever arrived somewhere: "Ahh, the family comes on a visit. Have just made a cake and the kettle is humming jocoseley." - "We only wanted to say hellejojo and are in effect already on our way." rofr

  • rate this
    +3

    Comment number 363.

    A Greek double dip sounds delicious.

  • rate this
    +2

    Comment number 362.

    (Percy) Dave (Green Fingers) Cameron needs to realise that the fiscal weeds of government departmental spending that he is trying to eliminate grow in the same medium as the green shoots of economic recovery that he is purporting to cultivate. By poisoning the ground completely the country will reap nothing but hardship and disillusionment.

  • rate this
    +1

    Comment number 361.

    333.SeeDubya - I rather like your analogy. The key point raised is timing of borrowing. Your mortgage was well timed; The funds were invested in a market on a steep incline. The UK economy is being outstripped by Eastern economies with better conditions for enterprise and growth. Increased borrowing now would be – to use your analogy – like taking out a huge mortgage on a dilapidated mansion.

  • rate this
    +2

    Comment number 360.

    It doesnt take long for the fractional reserve banking to rear its ugly head on here does it

    Looks like some people are still very naive to the fact that their whole lives have been manipulated since the day they were born

    The "SYSTEM" only exists if you believe in it

    Once things really heat up and peoples debts turn into lifetime debts we will see millions wake up to what has been done to them

 

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