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The UK economy continues to contract
28th September 2012
Here is a ray of brighter news for followers of the British economy! New figures suggest a weaker contraction than feared when early data on GDP was released a few weeks ago.
The Office of National Statistics originally published UK GDP figures for April to June, initially stating that the UK economy had shrunk by 0.7%. However this data was revised last month to a contraction of 0.5% and more recently to 0.4%. Usually, first figures for GDP at any quarter are referred to as a "flash estimate" due to data that has not yet been fully collected. Once the first statistic for GDP has been announced during a quarter, this figure is often revised twice more because of new data.
For example, construction output fell within the April to June period by 3%. This figure has been revised from the second estimate of a 3.9% decrease, down from the first figure of 5.2%.
| Original data | First revision | Second revision | |
| % change in construction output | -5.2 | -3.9 | -3.0 |
The construction sector has been acting as a drag on economic recovery as has output in our manufacturing sector. This sector fell by 0.8%, revised from a 0.9% fall. The service sector experienced a 0.1% fall which was unchanged from the first figure.
Although the new figure for GDP was slightly more positive for the economy, the British Chambers of Commerce reacted by saying that it was "still too gloomy"
This is the most recent data for the UK's GDP growth rate. A recession is best defined as "6 months of consecutive negative growth." It suggests that the UK is still in a recession. However the figures might have been affected by events during the summer. In the second quarter of 2012, the Diamond Jubilee bank holiday and the exceptionally wet weather in June would have distorted this data and not give a true reflection of economic activity. Furthermore, the London Olympics might have overstated how well the economy actually performed in the third quarter of 2012.
Sources:
http://www.bbc.co.uk/news/business-19740370
http://www.tradingeconomics.com/united-kingdom/gdp-growth
BBC news videos on recent GDP statistics for the UK economy
