THE UK recession was deeper than previously thought, showed revised estimates released by the Office for National Statistics yesterday.
The growth estimates for the fourth quarter 2011 were revised down to -0.4 per cent, rather than the 0.3 per cent shrinkage previously estimated.
On the other hand, the new data estimates a 6.3 per cent contraction from peak to trough in the recession of 2008 and 2009, comparing to an original estimate of 7.1 per cent. The new estimates have current GDP as just 3.9 per cent lower than peak output, whereas output was previously believed to remain 4.4 per cent down.
“The GDP data this morning show further signs of economic weakness,” said Michael Saunders at Citi European economics, “The economy has been roughly flat for about two years and…is likely to remain depressed given headwinds from high private debts, poor credit availability, tight fiscal policy and the EMU crisis.”
“With weak nominal growth and falling inflation, there is a clear need to add sizeable stimulus urgently.”
The newest estimates confirm that GDP inched down 0.3 per cent in the first quarter, while manufacturing also fell 0.3 per cent and services crept up 0.2 per cent. Household consumption was flat, decreasing 0.1 per cent, while nominal wages rose 1.1 per cent – well below inflation.
The release also included data on trade, showing the current account deficit widening to £11.2bn in the first quarter of the year.
Analysts at Investec said it was a concern that the largest positive growth contribution came through from government consumption.
“As the government presses on with this plan through the year ahead, we would expect the demand support provided by government spending to be squeezed with this therefore potentially weighing on quarterly growth outturns,” Investec analysts warned in a note.