Britain's economic drop revised up slightly
LONDON (AP) — Britain's economy shrank by 0.5 percent between April and June — slightly less than previously feared — though the revised official figures published Friday still show the country is stuck in recession.
The Office for National Statistics said the revision from a 0.7 percent drop was in part due to a milder-than-forecast drop in manufacturing and construction output.
Those two sectors nevertheless remain the weak points of the economy. The one-off jubilee holiday to mark Queen Elizabeth II's 60 years on the throne — and a sustained bout of wet weather earlier this year — may also have played a role in keeping the economy down, the office said.
Vicky Redwood, the chief U.K. economist at Capital Economics, said that the slightly improved figures had been widely expected, "but the revision is very small in the big picture and means that output is still more than 4 percent below its pre-recession peak," she said — a reference to the height of the boom years that preceded the 2008 financial crisis.
The statistics office put the fall in the construction industry's output at 3.9 percent, adding that output of British manufacturing and production industries fell by 0.9 percent. The service industry also contracted slightly, by 0.1 percent. The office said in a statement that the fall "indicates a mild contraction and reflects the difficult economic conditions faced by businesses and consumers, domestically and globally. It is also noted that the additional public holiday and bad weather during the second quarter may have adversely affected economic performance."
Graeme Leach, the chief economist at the London-based Institute of Directors said that the sharp fall in manufacturing and construction output was a concern "since it's difficult to see where the kick to growth comes from for any sector."
He said that the British economy was "flat lining" and still faced uncertainty linked to turmoil in the eurozone.
"Until that begins to ease the U.K. economy will bump along the bottom," he said.
Britain has been in recession for much of the last four years. Like many other developed economies, it suffered a deep 18-month recession following the financial crisis. That only ended in the last quarter of 2009. Since the fourth quarter of 2009, GDP has fallen in five of the last seven quarter. The technical definition of a recession is two successive quarters of decline.
The International Monetary Fund cut its forecast for U.K. growth this year to 0.2 percent from 0.8 percent, but the latest data suggest even that may be optimistic.
Several analysts estimate the British economy is set to shrink by 0.5 percent over the whole of 2012. By contrast, the U.S. economy, which is itself weak, is forecast to grow as much as 2 percent in 2012.
The office said Britain's ongoing recession has dragged down the country's gross domestic product to around the same level as it was in the second quarter of 2010, meaning that "GDP growth has been broadly flat over the last two years."