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
    +9

    Comment number 519.

    Maybe we didn't panic buy enough diesel or hot pasties

  • rate this
    +18

    Comment number 518.

    Prices for essentials such as food, rent, energy & fuel, transport, and even water, are going up and up. Seemingly without end. At the same time wages are stagnating, even going down; and many people are losing their jobs.

    Of course we're in constant recession. Most people are having to spend so much now on things they can't do without, there's no money left to spend in the wider economy.

  • rate this
    +9

    Comment number 517.

    I've always judged a government's performance by comparing my own yearly finances, I'm now 54 years old & for the first time in my life I have had no option but to become overdrawn at my bank, a bank I've had the same account with since age 17! I think it's now long past the time for more wait & see if this works from an obviously incompetent government. They should be sacked straight away!

  • rate this
    +4

    Comment number 516.

    How long before we fight over a loaf of a bread in a shop? is this too distant - a state of economy seen in Great Depression and WW1 and WW2 days.

  • rate this
    +3

    Comment number 515.

    As long as private banks are allowed to create money as debt there is no solution, it demands continual growth from finite resources.The issuance of money should be a public privilege & should be spent(interest free) into the economy e.g. infrastructure. Banks can then only invest money deposited by customers,then we'll find out who has the real talent.

  • rate this
    0

    Comment number 514.

    why the out cry G Brown said vote Tory get a double dip recession, we voted, but lib-dems vote counted more,even thou it was a liars charter used to get their vote, very very quite over Hunt the dems are

  • rate this
    0

    Comment number 513.

    Nothing will change while ConDemLab argue over tinkering around the edges. We need a fundamental restructuring of banking; primarily making sure the central banks are the ONLY institutions that can create money.

    We also need to ask how perpetual growth is possible.

    If you don't understand that all private banks create money, read http://prosperityuk.com/2006/10/stopping-the-debt-driver/

  • rate this
    +11

    Comment number 512.

    480.
    chiptheduck

    I wish these idiots would step outside their ivory towers and spend some time on the street.

    Out here it's permanent recession. We're always skint no matter how hard we work because the fatcats are gorging the cream. And if you're over 60 things are going to get worse.

    ##########
    I'd suggest over 50, since no-one's going to give you a job (senior managers excepted.....)

  • rate this
    0

    Comment number 511.

    It's not rocket science here, the country does need investment, housing is one of them but the big one is manufacturing on a massive scale, when that investment goes in & we have our local towns and cities filled with factories churning out goods which brings money into local econimies we will get out of the mess.

    It's apitty the government don't put their money where there mouth is.
    Cont...

  • rate this
    -2

    Comment number 510.

    496.Old Mr Boston
    Moving away from an economy reliant on the consumption of imported goods and speculative financial services will take time, imagination, and guts.
    --
    This is what the left has been arguing for years...

  • rate this
    0

    Comment number 509.

    Welcome back Mr De Wall. I see its all panning out as predicted. I suspect some more money printing will be carried out, despite rising inflation, in desperation to prop up the GDP figure. Not that it will save the day.

  • rate this
    +1

    Comment number 508.

    In repairing our economy which is losing billions to interest payments alone, we know this is going to be a rocky road to recovery. The good thig is that many indicators are showing positive signs. The worst thing about a double dip recession is just that it gives empty people like Milband something to squawk about, and the newspapers a chance to revel in the headlines.

  • rate this
    +2

    Comment number 507.

    490.
    juliecontrite
    _

    There were recent strikes and protests to stop the establishment deskilling many trade jobs and replacing them with "semi skilled" (ie virtually unskilled) labour at min wage rates so the corporate structure could retain more money. Google BESNA. Who wants untrained folk wiring a hospital? Or plumbing a hotel? Trades would have died off altogether, except the strikes worked.

  • rate this
    +1

    Comment number 506.

    WRITINGS ON THE WALL

    The 99 year ponzi scheme is still alive and well.

    The centenary is going to be life changing for everybody.

  • Comment number 505.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +5

    Comment number 504.

    There is no smoke without fire.. so why surprise? As most MP are from Wealthy back ground. I wish Mr. Cameron&Osborne get minimum wages& working 16 hours a week, and they know what ordinary people dealing with rising living costs&fuels.20%tax. My mum said to me, if your parents rich, they'll treat you like a king, but if your parents poor, they'll work hard for you just in order to feed you.

  • rate this
    +2

    Comment number 503.

    It's the fault of the previous administration, the world downturn, the eurozone. The excuses drone on and on. Its the fault of successive, greedy/incompetent, UK Governments that put financiers before manufacturers, celebrity over engineering, the rich over the masses and American foreign policy over common sense. This ships run aground but the idiots are still turning the helm.

  • rate this
    -17

    Comment number 502.

    498 novolak
    "money or quality of life ? - you choose !"

    Don't have to - I have both! I have worked hard all my life. Unless you start doing likewise, you will have neither!

  • rate this
    +1

    Comment number 501.

    482 WOTW
    I think it was you that said something like "you can't spend confidence in the shops". People are spending less because their real incomes are lower. Demand attracts investment, so lower spending means lower investment.

  • rate this
    +2

    Comment number 500.

    "Arrogant, posh boys just don't get it" Thanks for the admission Ed.

 

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