UK economic output continues to shrink

24 07 2009 United Kingdom

The UK economy contracted by 0.8 per cent between April and June, more than double the figure that economists had predicted.

Last quarter’s contraction was much less than the 2.4 per cent fall seen in the first quarter of the year. However it was above the consensus expectation of 0.3 per cent and below even the worst expectations in a recent survey of analysts.

The latest figures take the annual rate of decline to 5.6 per cent, the biggest fall since records began in 1955.

While showing an improvement on the previous quarter, the figures may indicate that the recovery could take longer than some experts had forecast.

Some now say it would take a major shift in economic performance to meet business owners’ hopes for a boost in orders and sales by the end of this year. Analysts pointed to companies restocking after they had run down their inventories, rather than signs of a recovery in consumer spending.

The decline in economic output was driven by services, with the biggest contribution to decline from the business services and finance sectors. Hotels, restaurants and motor trades also fell.

Sterling weakened further as a result.

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