UK economy shrank by 0.4 per cent in second quarter

City A.M. Reporter
The UK economy fell by a less-than-expected 0.4 per cent in the second quarter, down from the previous estimate of 0.5 per cent.

GDP was 0.5 per cent lower than in the second quarter of 2011.

Official figures from the Office for National Statistics out this morning said that a steel slump of 0.3 per cent in construction output remained the main drag on the economy. Manufacturing output shrank 0.8 per cent and services output fell 0.1 per cent.

The British economy fell back into recession in the final quarter of 2011, as the Eurozone debt crisis and the government’s austerity measures weighed on output.

Chris Williamson, chief economist at Markit, said this morning that a rebound is “likely” for the third quarter.

“Data such as retail sales, industrial production, tax receipts and exports have all suggested that the economy picked up again in July, and the PMI surveys improved again in August,” he said.

He added that the underlying rate of growth will still remain very modest.