Economy shrinks at fastest rate for half a century

Author: Press Association

Output fell by 2.4 per cent in the first quarter of the year – much worse than
the 1.9 per cent drop previously estimated – the Office for National
Statistics (ONS) said.

The quarterly decline equals a 2.4 per cent slump seen in 1974 and is the
worst since a 2.6 per cent fall seen in 1958.

The figures also showed the current recession began earlier than expected,
with a 0.1 per cent decline seen between April and June last year compared
with previous estimates of zero growth.

Following the revision – which also saw a deeper 1.8 per cent decline in the
final quarter of 2008 – the UK’s output is now 4.9 per cent below the level
seen before the recession.

The new figures for the first three months of this year reflect a much
deeper-than-expected fall in construction activity during the period.

The UK’s powerhouse services sector – accounting almost three-quarters of
output – also endured its worst quarter on record with a 1.6 per cent
decline.

Liam Byrne, Chief Secretary to the Treasury, said the figures were “historic”,
reflecting the state of the economy months earlier.

“They don’t change the judgment made by the Chancellor in the Budget that
growth will return at the end of the year,” he added.

“There have been some tentative signs that the fall in output is
moderating and I remain confident but cautious about the prospects for the
economy,” Mr Byrne said.

Royal Bank of Scotland economist Ross Walker said: “Although to some
extent this is ‘old news’, it does serve to emphasise the size of the hole
out of which the UK must climb.”

The squeeze on consumers in the current climate was underlined by a 1.3 per
cent fall in household spending – the biggest fall since 1980 – amid
cutbacks on furniture and furnishings, food and drink, and foreign travel.

Households’ disposable income fell 2.4 per cent during the quarter, while
savings levels were also revised down.

The ONS said employee compensation fell 1.4 per cent between January and March
– the biggest fall on record – due to lower wages, falling employment and
lower-than-normal bonuses in the City.

Pay levels are now 1.7 per cent below the same period a year earlier, it
added.

But the figures also held out some support for experts forecasting a shallower
decline in the second quarter of this year.

Stockpiles held by manufacturers and builders fell steeply – by £5.5 billion
between January and March – suggesting that firms will soon step up
production and generate growth, even at muted levels.

Recent survey data also showed signs of recession bottoming out in
manufacturing, services and construction sectors, with some signs of life in
the housing market.

“The survey data suggest we have at least stopped digging, but the
economy remains on course for a lacklustre pace of recovery,” Mr Walker
added.

View full article here


VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)

Tags: , , , , , , , , , , , , , , , , , , ,

Ezine Article Board

Author:

This author has published 5774 articles so far.

Comments are closed