Member Article

Economy shrinks less than expected

The UK economy shrunk less than expected in the second quarter, say the ONS, as figures show GDP decreased by 0.4%.

Last month, the ONS had estimated a decline of 0.5%, and before that had suggested a 0.7% decline.

Output of the production industries fell by 0.7% and manufacturing output fell by 0.8%, while construction output fell by 3%.

David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: “The revised GDP figures show smaller declines in both construction and manufacturing output than previously estimated. Although this is a welcome revision, we believe the new figures are still too gloomy. Three consecutive quarterly declines in GDP since the fourth quarter of 2011 are difficult to reconcile with rising employment and falls in the jobless rate. However, it is clear that the UK economy has been stagnant for too long and bold measures are needed if we are to return to growth.

“There is some positive detail in the new figures. The quarterly fall in consumer spending was less than originally thought, and there was a modest increase in business investment. On the downside though, exports declined in Q2 and there was a large trade deficit. The figures also confirm that government consumption rose over the past year despite the fall in GDP, which goes against the popular assumption that spending cuts are happening quickly.

“The UK economy will face difficult challenges over the next year as the government perseveres with its deficit cutting plan, and continued problems in the eurozone will create obstacles for our exporters. Bold initiatives are needed from government so the private sector can drive recovery, invest, export and create jobs.”

This was posted in Bdaily's Members' News section by Tom Keighley .