The latest GDP figures released by the Office for National Statistics today shows that the slip into recession was a little deeper than initially calculated.
The ONS has revised the contraction in GDP for the final quarter of 2011 from -0.3% to -0.4%. It did though leave the -0.3% figure for the first quarter of 2012 unchanged.
This means that this part of the double dip recession is marginally worse than originally thought and will further dent confidence in the coalition government’s one and only ‘Plan A’. It also looks like the second quarter this year will continue to show the UK as being in recession.
Looking further into the 2012 Q1 statistics the output of the production industries fell by 0.5%, output of the construction industry dropped by 4.9% and service industries output rose by 0.2%.
Household expenditure dropped by 0.1% over the first quarter in volume terms and compensation to employees rose by 1.1%.
Commenting on the ONS figures Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said:
“It’s not a huge surprise that the Q1 figure was unrevised. While we fully expect it to be pushed up at later date, to be more consistent with the stronger data from the labour market and other sources, history tells us that it will take some months or even years before that happens.
“The expenditure side of the accounts for Q1 still looks a little odd, which further dents our faith in the data. The degree of destocking and surge in government spending look particularly suspicious.
“The consumer sector remains somewhat of a mystery. On one hand the big downward revision to consumer spending looks inconsistent when compared to the much stronger retail figures. But on the other hand, it looks much more aligned with the income side, which demonstrates the extent that households have been squeezed by the combination of high inflation and weak earnings growth. We are optimistic that this will finally turn around over the second half of this year as inflation plunges. Although it would be foolish to rely on the consumer to be the driving force it has been in previous recoveries.
“The Blue Book revisions have seen a modest scaling down of the depth of the 2008/09 recession, but the revisions look smaller than in previous years and don’t fundamentally change the picture.
“The probability of another negative quarter in Q2 looks high. Recent monthly data for manufacturing and construction has been very weak and June’s extra Bank Holiday is likely to have exerted a significant drag. Q3 will look better, with the Olympics providing some support, but growth over the year as a whole is likely to be barely positive, if at all.”