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Last Updated:[28-09-2012 01:13:39 EDT] Zoom in Zoom out Back to Tradenews

UK economy shrank less than thought in Q2

tradenews LONDON: Britain's economy shrank slightly less than so far estimated in the second quarter, data showed on Thursday, providing a somewhat better base for the expected recovery in the coming months.

Britain's gross domestic product (GDP) fell 0.4 per cent on the quarter in the three months from April to June, the Office for National Statistics said. GDP was 0.5 per cent lower than in the second quarter of 2011.

Economists had expected both rates to remain unrevised to show a 0.5 per cent fall on the quarter and the year.

The British economy slipped into recession in the final quarter of 2011 as the euro zone debt crisis and the government's austerity measures weighed on output.

A steep slump of 3.0 per cent in construction output remained the main drag on the economy in the second quarter, though manufacturing production also declined by 0.8 per cent and services output shrank by 0.1 per cent.

Household spending fell 0.2 per cent although real disposable income rose by 1.9 per cent on the quarter. The savings ratio increased to 6.7 per cent from 6.0 per cent in the first three months of 2012.

Recent data and surveys point to a return to growth in the third quarter, when ticket sales for the London Olympics and a recovery of the output lost due to an extra public holiday in June will boost GDP.

However, the economy remains fragile and most economists expect the central bank to extend its quantitative easing asset purchases once the current 50 billion pound round is completed in November.

The ONS also released second-quarter current account data, which showed that Britain's deficit with the rest of the world jumped to a record-high of 20.8 billion or 5.4 per cent of GDP, up from a revised deficit from 15.4 billion in the first three months of the year.

Economists had expected the current account gap to narrow to 12.40 billion pounds.

Source : Economic Times

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