UK recession deepens after 0.7% fall in GDP

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
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
"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.
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
"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.
"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
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

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