UK Economy Has Re-Entered Recession
The UK economy has re-entered recession after shrinking by 0.2% in the first quarter of 2012.
The Office for National Statistics claim that a sharp fall in construction output was the primary factor behind the surprising reduction and follows a further reduction of 0.3% for the final Quarter of 2011. Some have questioned the validity of the ONS’ figures, particularly on the construction industry, which has been volatile in recent quarters.The ONS said output of the production industries decreased by 0.4%, construction decreased by 3%, and output of the service sector increased by 0.1%.
A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011.
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.
Prime Minister David Cameron speaking at Prime Minister’s Questions said:
“I don’t seek to excuse them (the figures), I don’t seek to try to explain them away. “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.
Mr Miliband said:
“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.”
KPMG Chief Economist, Andrew Smith, said:
“It’s official, we’re in a double-dip.”
“The 0.2 percent fall in GDP in the first quarter, coming on the back of the 0.3 percent decline at the end of last year, confirms that the UK moved back into technical recession over the winter.”
“But worse, output remains broadly unchanged from its level in the third quarter of 2010 and, four years on from its pre-recession peak is still some 4 percent down– making this slump longer than the 1930s Depression.”
“Looking ahead, output is expected to remain weak in the second quarter and with extra holidays, the Jubilee and the Olympic Games distorting the picture over the summer it will be some time before the underlying picture is clear. But even if activity recovers in the second half, overall this looks like being – at best – another year of weak growth, held back by squeezed real incomes and public spending cuts. Recovery postponed (again).”