(Updates with economist comment in fourth paragraph, services data starting in fifth, Treasury in 11th.)
Oct. 5 (Bloomberg) -- U.K. economic growth slowed more than initially estimated in the second quarter as consumer spending fell the most in more than two years, adding to pressure on Bank of England policy makers to provide more stimulus.
Gross domestic product rose 0.1 percent from the first quarter instead of the 0.2 percent previously published, the Office for National Statistics said today in London. Consumer spending plunged 0.8 percent, the most since the first quarter of 2009. On the year, GDP rose 0.6 percent. A separate report showed services growth unexpectedly accelerated in September.
The data comes as Bank of England policy makers meet to decide whether they’ll revive their bond-purchase program as the government’s fiscal squeeze and Europe’s debt crisis harm growth prospects. Chancellor of the Exchequer George Osborne this week announced a plan to aid credit-starved small companies.
“The outlook is uncertain and possibly very, very weak,” George Buckley, an economist at Deutsche Bank AG in London, said in a telephone interview. “I don’t think growth is going to be strong in the second half of this year or the first half of next year. I don’t think the Bank of England will move on more QE this week, but we will probably see more QE at some point.
A report from Markit Economics and the Chartered Institute of Purchasing and Supply today showed U.K. services growth unexpectedly accelerated from an eight-month low in September.
The pound remained lower against the dollar after the reports were published. It traded at $1.5442 as of 10:53 a.m. in London, down 0.3 percent on the day. Bonds declined, with the yield on the 10-year gilt rising 5 basis points to 2.30 percent.
The ONS published revisions to economic data today. The recession is still estimated to have begun in the second quarter of 2008 but lasted for five quarters instead of six. The peak- to-trough decline in GDP was 7.1 percent, more than the previously reported 6.4 percent, the ONS said, noting that the downturn was “shorter, but steeper and deeper.”
Government spending rose 1.1 percent in the second quarter from the previous three months, when it increased 0.8 percent. Exports fell 1.3 percent after rising 1.5 percent in the first quarter, while imports fell 0.3 percent. Company investment jumped 1.7 percent, the most since the first quarter of 2010.
In the output categories, services growth slowed to 0.2 percent in the second quarter from 0.7 percent in the previous three months, while manufacturing slowed to 0.2 percent from 1.1 percent. Overall production shrank 1.2 percent after a 0.1 percent contraction. Construction grew 1.1 percent after shrinking 2.7 percent. The GDP deflator was 2.4 percent.
A gauge of services activity based on a survey of purchasing managers gained to 52.9 in September from 51.1 the previous month, Markit and CIPS said today in a report released in London. The report followed a separate Markit survey this week showing manufacturing rebounded in September from a 26- month low.
“While the U.K. cannot insulate itself from what is happening to our major trading partners, with financial turbulence in the euro zone and a weaker outlook for global growth, the economy is still growing and this week’s survey data for the manufacturing and service sectors are consistent with continued expansion,” the British Treasury said in a statement.
Consumer spending fell for a fourth straight quarter in the three months through June. In addition to the government budget cuts, consumers are getting squeezed by inflation that’s more than double the central bank’s 2 percent target and is outpacing wage growth. Tesco Plc, the biggest U.K. retailer, said today its U.K. stores had their worst sales performance in at least six years in the six months ended Aug. 27.
The ONS said last week publication of economic accounts and balance of payments scheduled for today will be delayed to Oct. 25 as it undertakes the biggest revision to the national accounts since 1995.
The statistics office revised 2010 GDP growth to 1.8 percent from 1.4 percent. It also revised 2008 and 2009 growth to minus 1.1 percent and minus 4.4 percent from minus 0.1 percent and minus 4.9 percent respectively.
The euro-area economy also lost momentum in the second quarter, with growth in the 17-nation bloc slowing to 0.2 percent from 0.8 percent in the first three months of the year. The U.S. economy, the world’s largest, grew an annualized 1.3 percent in the second quarter.
Speaking at the Conservative party conference on Oct. 3, Osborne proposed lending billions of pounds of public money to British companies that have been struggling to obtain credit from banks in a program known as credit easing. The coalition government has refused to slow the pace of deficit reduction, and its Liberal Democrat partners are insisting Osborne find ways to stimulate growth.
Nine of 30 economists surveyed by Bloomberg News say the central bank will increase its target for asset purchases tomorrow, and the rest say the bank will hold the program at 200 billion pounds ($309 billion). The bank will announce the decision at noon in London. All 53 economists in a separate poll say policy makers will hold the benchmark rate at a record low of 0.5 percent.
--With assistance from Gonzalo Vina in London Editors: Fergal O’Brien, Andrew Atkinson
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