The UK’s double-dip recession is deeper than originally estimated, according to new figures released today by the Office for National Statistics (ONS).
An updated assessment shows that gross domestic product (GDP) shrank by 0.3% in the first three months of 2012, revised from last month’s initial estimate for the quarter of 0.2%.
The main reason for the downward revision was a bigger contraction in construction output, which is now believed to have fallen by 4.8% – the steepest decline seen for 11 years – compared with the previous estimate of 3%.
The ONS said that the quarterly output of the production industries fell by 0.4%, within which manufacturing output was flat, while the service industries made a positive contribution to growth with output rising by 0.1%.
Although last month some analysts believed that the GDP estimate could be revised upwards, today’s second estimate confirms that the UK is in recession – defined as two consecutive quarters of economic contraction. The latest estimate is also subject to revision, but the announcement puts pressure on the Government regarding the impact of its austerity measures on economic recovery.
Overall, government spending increased by 1.6% in the first quarter – the biggest rise since the first quarter of 2008 – driven primarily by spending on health and defence. Business investment rose by 4%, while household expenditure showed a marginal increase of 0.1%, down from 0.4% growth in the preceding three months.
Yesterday the Bank of England released the minutes for the last meeting of its Monetary Policy Committee (MPC), revealing that the nine members of the committee voted 8-1 against expanding quantitative easing (QE) to boost growth in the economy.
However, for several members the decision not to expand the asset purchase programme was said to be “finely balanced”, indicating that the Bank of England policymakers see a case for further monetary stimulus at some point. All nine members voted to keep interest rates on hold at 0.5%.