Financial News

Tuesday June 30, 11:37 AM
British economy shrinks fastest since 1958

LONDON (AFP) - The recession-battered British economy shrank at its fastest pace in more than 50 years in the first quarter of 2009, revised official data showed on Tuesday, amid the worst global slowdown in decades.

Gross domestic product (GDP) contracted 2.4 percent in the first three months of the year from the final quarter of 2008, said the Office for National Statistics.

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"GDP in real terms fell by 2.4 percent compared with the previous quarter, revised down from last month's estimate of 1.9 percent. This is the largest decrease since the second quarter of 1958," the ONS said in a statement.

"Around half the revision... is a result of new construction output data, while the remainder reflects more complete data for services," it added.

On a year-on-year basis, the economy declined by 4.9 percent in the first quarter, the largest contraction since records began in 1948, and compared to the statistic office's earlier estimate of minus 4.1 percent.

"Even deeper contraction in GDP in the first quarter is obviously unwelcome news, but it is also old news and matters have moved on appreciably since then," said Howard Archer, chief Britain economist at IHS Global Insight.

"The good news is that the economy probably at worst contracted only modestly in the second quarter and it is not inconceivable that it managed to eke out marginal growth," he added.

The ONS on Tuesday added that GDP had stood at minus 0.1 percent in the second quarter of 2008 rather than showing flat growth, meaning the current recession began earlier than expected.

However fresh signs of better times ahead for the economy also appeared on Tuesday as home-loans provider Nationwide said house prices had increased by 0.9 percent in June from May.

"House prices have now risen in three of the last four months, suggesting that the improvement that began to show up in March represents more than just statistical noise," Nationwide's chief economist Martin Gahbauer said in a statement.

Economists' consensus forecast had been for a 0.5 percent drop in house prices in June compared to May.

"On balance, the stabilisation of house prices is a welcome surprise that did not seem likely at the beginning of the year," said Gahbauer.

"However, there are still considerable headwinds facing the demand side and until we see a more robust recovery in house purchase activity, it is too early to be confident about a full-scale recovery of prices," he added.