UK recession less deep than thought

 

Joe Grice of the ONS says construction and manufacturing output fell less than thought

The UK economy shrank by less than previously thought between April and June, official figures have shown.

Revised data from the Office for National Statistics (ONS) show the economy contracted by 0.5% during the quarter, less than the 0.7% it announced last month.

The ONS said output in the construction sector was higher than it had previously estimated.

Many economists had expected the figures to show a smaller contraction.

The original estimate of a 0.7% contraction, published in July, was greeted with some scepticism by a number of experts and by some industries that claimed they had seen little sign of such a serious economic downturn.

"The production sector was not quite as bad [as we thought]; similarly the construction sector," Joe Grice from the ONS told the BBC.

He said each accounted for a 0.1% revision to the original 0.7% estimate.

The ONS had already said that output from the construction sector fell by 3.9% between April and June compared with the previous quarter, compared with an earlier forecast of a 5.2% drop.

Analysis

So things don't look quite so bad, but the economy was still contracting in the second quarter. Revisions to industrial production and construction, as widely predicted, reduced the scale of the overall fall in output.

Given the Bank of England believes that the extra Bank Holiday in June reduced growth by 0.5%, it could be argued that, after accounting for that, the economy was flat between April and June.

The first estimate suggested that British GDP was lower than it was when the coalition took office in 2010. Today's revision now reveals that output was actually flat over that period - some consolation for the chancellor.

But the underlying picture is unchanged - the economy is stagnant and its not clear where growth is going to come from.

GDP figures show the value of all the goods and services produced in the economy. The ONS always refines its GDP calculations as more data becomes available and changes to the original estimates happen on a regular basis.

Output 'stagnating'

Mr Grice said the revision did not change the overall picture of the UK economy, which has been "broadly flat over the past two years".

Economists agreed with this assessment.

"The revision is very small in the big picture and means that output is still more than 4% below its pre-recession peak," said Vicky Redwood at Capital Economics.

"Remember that the extra bank holiday probably knocked about 0.5% off GDP. But even so, underlying output is just stagnating."

A number of analysts believe GDP will rebound in the current quarter, partly due to the impact of the Olympic games. A rise in consumer and government spending, as well as the boost from ticket sales that will be recorded in the July to September quarter, should lift growth, they say.

'Difficult process'

The UK economy is in recession having contracted for the past three quarters.

Some observers have blamed the government's severe spending cuts for undermining growth.

Labour's Chris Leslie: "These are fairly minor changes to what is a pretty grim story"

Labour's shadow Treasury minister Chris Leslie told the BBC that action, not talking, was needed to stimulate growth. He said the government should introduce a temporary cut in VAT to help consumers and a levy on bankers' bonuses to help fund jobs programmes for the young.

A Treasury spokesperson said: "Britain is dealing with some very deep-rooted problems at home and a very serious debt crisis abroad, and that is why the healing of the economy is proving to be a slow and difficult process.

"Compared to two years ago the deficit is down, inflation is down, and there are more private sector jobs."

Some have questioned why the economy is shrinking when unemployment is falling.

Mr Grice said one reason for this anomaly was the move to part-time work, which had also affected the "productive capacity" of the economy. He said this was a very similar situation to many other economies outside the UK.

 

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  • rate this
    -1

    Comment number 230.

    Economists, Politicians and the Treasury all over complicate the situation. No one anywhere in the world has much money because one by one every governent round the world gave all the money to the banks. In a capitalist society one business must go broke so another can become stronger. By not allowing the banks to go broke everyone is suffering

  • rate this
    +1

    Comment number 229.

    226.Whistling Neil
    well their more like assembly lines seeing as very few of the components are made in the uk so essentially they are assembled from kit form then sprayed at least we still paint them.so their true worth in the whole scheme of balance of payments is actually very small but hey were good kit car assemblers.

  • rate this
    +24

    Comment number 228.

    Just sack Osborne.

  • rate this
    +18

    Comment number 227.

    The way to kick start the economy is to to take all the squillions of quantitative easing and use it to build hospitals, schools, roads. Using it for that drives employment, gives people money to spend and gets things moving again. Giving it to banks who wont lend it to anyone is no use at all to anyone.

  • rate this
    0

    Comment number 226.

    213 Cars are one of the things we actually export in large numbers. Try Vauxhall, Nissan, Honda, Mini, Jaguar, Landrover, Ford who all make cars here and employ tens of thousands.
    Once the incompetence that was British owners, managers and unions were removed from the picture - our workers got on with doing what they know best, making darned good products that sell.

  • rate this
    0

    Comment number 225.

    mattmatt81 complicated QE public sector pay. Public sector pay is not an asset its a government expense and they mentioned assets. Look all I want is transparancy and BOE as a unelected body should not have a policy that favours one particular section of society that is dangerous.

  • rate this
    +5

    Comment number 224.

    From 0.7 to 0.5% shrinkage - like telling someone that they've broken every bone in their body, but now we've found one in tact. So that's alright, then.

  • rate this
    +1

    Comment number 223.

    what a load of nonsense, I say this to economists" go out and get a proper job."

  • rate this
    -2

    Comment number 222.

    171 - It is bad that you don't receive support with your son but isn't that precisely because the govt is trying to avoid the cost of helping you due to the cuts they are making. The state doesn't poison everything - it created the NHS which is now being poisoned by privatisation and profit over patients. It is the wealthy and govt puppets that mismanage the UKs adequate resources that are poison.

  • rate this
    0

    Comment number 221.

    Growth will come when we have all finished paying off the debts of the banks and not a moment sooner. All of the cuts, higher taxes, higher prices and poorer services are direct results of the immoral behaviour of the banking system, and a lack of governance by our leaders -- of all parties.

    Try remembering that when your being told it's someone else's fault.

  • rate this
    -1

    Comment number 220.

    203. alexicon
    171.Anarcho-libertarian
    A smaller state will see your son with no support as opposed to not enough.

    I would happily see an end to the small support we receive if if meant that the generally useless SS had severe reduction in its head count. It is obscene that these people draw salaries to do little more than push paper around.

  • rate this
    +19

    Comment number 219.

    It never felt like that much of a recession. And indeed it wasn't that much of a recession.
    -Certainly not at Tory Lie Central or for our CEO's average pay up by 10% , 8 times faster than the rest of us, on last year to £3 million and with a nice £140,000 tax cut to look forward to courtesy of the muppet in no 11!

    For the rest of us it is dismal.
    Still there's always the Paralympics

  • rate this
    +5

    Comment number 218.

    4.John_from_Hendon
    We must also get property prices down substantially to re-establish UK competitiveness.

    You mean -ve equity, repossession, homelessness, ? No that way lies ruin. House prices are too high but we need to stop them rising and catch up, not cause a crisis.
    We also need to invest in jobs and invest in technology and promote the inventions and ingenuity of Britain.

  • rate this
    +16

    Comment number 217.

    The government’s policies have failed.

    They should do the right thing and resign and let the people judge them.

  • rate this
    -1

    Comment number 216.

    204 modharry

    as i said there are many complicated effects of QE those being one of them .
    But the biggest Thing QE has achieved is to allow us to finance a budget defecit of more than 10% for four years . That has benefited anyone paid by the gov ,Plenty of whom do not live in kensington.

  • rate this
    +6

    Comment number 215.

    180.Tiger
    ..Labour..we are done with them.
    ---
    Only till 2015 by the look of it.
    What bothers me is the number of people, including Labour, who believe the opposite of austerity is growth. It isn't. It's borrowing, spending and hoping for growth. It hasn't worked in Japan (& Japan has a bigger export base & lower consumer debt than the UK), so why should it work here?

  • rate this
    -1

    Comment number 214.

    we need to startstanding up for ourselves as a country. Think of number One first (the British People) .Buy British as it will keep our jobs as this will help our country unlike and every Tory Govenment of today and yesterday. They dont the workers to have nothing we start to get on our feet we vote them back in but dont like us to have holidays, own houses so they put us out of work then they buy

  • rate this
    +16

    Comment number 213.

    I buy British foodstuff from local suppliers when possible, I would love to own another British car, but unfortunately the factory is now in China. any purchases I make I try to buy British. Our glorious leaders however don't care that our manufacturing base is almost now existent, financial services going to India/China, and I am sick of hearing about London supporting the UK.

  • rate this
    0

    Comment number 212.

    "It is all the this Conservative government's fault."

    "No it was all the fault of the last Labour government."

    "Now way, it all started with Thatcher."

    While the ideologically blinkered argue between which of the two centrist political parties screwed up the UK economy it is odds on that they will file into the polling booths in 2015 and vote for the same.

    Nothing will change unless you do.

  • rate this
    -2

    Comment number 211.

    Iain Duncan Smith will be delighted that things are now only dreadful instead of catastrophic, and a sunny disposition should be shown by all economic analysts lest Whitehall shall take a pee on them.

 

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