UK recession deepens after 0.7% fall in GDP

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BBC NEWS – The UK recession has deepened, latest official figures have shown, after the output of the economy fell by 0.7% between April and June.

The contraction was much bigger than expected and follows a 0.3% drop in the first three months of the year.

The Office for National Statistics said the fall was largely due to a sharp slowdown in the construction sector.

It said it was not yet sure of the size of the effect of the poor weather and the extra June bank holiday.

This means that these figures, which are the first estimate for what happened in the economy between April and June, are more uncertain than usual.

“The bottom line from all this is that the underlying performance of the economy was probably somewhat better than the headline figure of -0.7% would suggest, having regard to the extra bank holiday and to the poor weather,” said Joe Grice from the ONS.

“How much that effect might be is something we won’t be able to say or to quantify until we have further experience against which to judge.”

The figures could be revised in the coming months as more information comes in. The first estimate is largely based on information the first two months of the three-month period.

UK GDP growth, quarter on previous quarter%Source: ONS-0.7%20082009201020112012-3.0-2.5-2.0-1.5-1.0-

Chancellor George Osborne said the country faced “big challenges”.

“We’re dealing with our debts at home and the debt crisis abroad,” he said.

“But given what’s happening in the world, we need a relentless focus on the economy and recent announcements on infrastructure and lending show that’s exactly what we’re doing.”

In response, shadow chancellor Ed Balls said the figures showed the government’s economic plans had failed.

“If these figures don’t make the chancellor wake up and change course, then I don’t know what will,” he said.

“Thank goodness the Olympics will give our economy a much-needed shot in the arm. But this short-term boost is not enough – we need a plan B now to get the economy moving again and radical reforms to set Britain on a new course for jobs, growth and long-term prosperity.”

Construction slump

Output in the building sector fell 5.2% in the second quarter compared with the first. It is feeling the effects of the economic slowdown and a sharp drop in public spending on social housing and infrastructure projects.

Declan Curry explains just what GDP stands for, and why we should care

“This is a disaster for UK growth,” said Alan Clarke, economist at Scotiabank.

“It looks like construction has done a lot of the damage,” he said. “On average for the year, it’s looking very unlikely that we’ll be on the right side of zero growth. More likely we’ll be contracting.”

Production output, which includes manufacturing, decreased by 1.3%, while services output was down 0.1%.

RBS economist Ross Walker said he had expected the retail sector to grow during the quarter.

“The main disappointment is the services number,” he said.

“We thought even with the drag from the Jubilee that we would probably just about squeeze some growth out of that sector, [but] it’s contracted.”

An economy is considered to be in recession when its output has declined for two consecutive three-month periods.

The UK economy is in a double-dip recession as after a period of recession, it briefly starting growing again before a second bout of falls.

Earlier this month, the International Monetary Fund said that the UK faced “significant challenges” from a stalling recovery, high unemployment and threats from the eurozone.

Are you feeling the effects of the recession? Do you work in the construction sector? Have you lost your job – or found a new one – in the last few months? You can get in touch using the form below:

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