Friday July 24, 11:51 AM
British economy sees record contraction
By Roland Jackson
LONDON (AFP) - Britain's economy shrank in the second quarter at its fastest yearly pace since records began in 1955, as the worst recession since the early 1980s tightened its grip, official data showed Friday.
Gross domestic product (GDP) contracted by 5.6 percent in the three months to the end of June, compared with the same period of last year, the Office for National Statistics (ONS) said in a statement.
The economy also shrank 0.8 percent during the second quarter compared with the first three months of the year. That marked the fifth quarterly contraction in a row.
The ONS added that the economy has now contracted by 5.7 percent since the first quarter of last year -- more than double the depth of the previous 1990s recession and on a par with the 1980s downturn.
The British economy had already contracted in the second, third and fourth quarters of 2008, and the first quarter of 2009, as the country sank into a fierce recession as a result of the global financial crisis.
"The larger-than-expected drop means that GDP has now fallen by 5.7 percent from peak to trough in this recession, putting it on a par with the recession of the 1979-81 -- where GDP fell 5.9 percent," said Credit Suisse economist Neville Hill.
He added that the data "was weaker than expected because of another steep fall in construction output and a downwards revision to April services output."
The technical definition of a recession is two or more successive quarters of negative economic growth.
The 0.8-percent decline marked an improvement from the 2.4-percent contraction seen in the first quarter -- which was the worst slump since 1958.
But market expectations had been for a smaller drop of 0.3 percent and an annual fall of 5.2 percent.
"The provisional UK GDP figures for Q2 are shockingly bad and firmly dash any hopes that the UK had already pulled out of recession," said economist Vicky Redwood at the Capital Economics consultancy.
The International Monetary Fund has forecast that the British economy will shrink by 4.2 percent this year because of the financial crisis, before returning to growth in 2010.
The government predicts the economy will shrink by 3.5 percent this year, before growing by 1.25 percent next year and by 3.5 percent in 2011. It grew by 0.7 percent in 2008.
"The United Kingdom has been hit hard by the global financial crisis," the Washington-based IMF said in a report earlier this month.
"The economy was particularly vulnerable to the crisis because of the large size of its financial sector, high household indebtedness, and strong cross-border links."
- Office of National Statistics ()
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