Recession fears grow as UK economy comes to standstill
Friday, 22, Aug 2008 10:13
The UK economy hit a standstill in the second quarter of the year, recording zero per cent growth, sparking fears of a recession.
Data from the Office for National Statistics reveal GDP growth stood at zero per cent – compared to a previous estimate of 0.2 per cent.
It is the first time growth has been at zero per cent in 16 years and brings to an end 64 consecutive quarters of economic growth.
Annual GDP growth is now 1.4 per cent – the weakest since 1992.
The slowdown was due to falls in output estimates for production, construction and services industries.
The figures show household expenditure fell by 0.1 per cent, down from growth of 1.1 per cent in the previous quarter - following falls in the consumption of goods, especially food and drink, and tourism.
Household expenditure is now 2.3 per cent higher than the second quarter of 2007.
Richard Snook, economist at the Centre for Economic and Business Research (CEBR), said: "The result will be a shock to the markets and is likely to push sterling and the FTSE lower and bond prices higher in trading today."
The figures also show a rise in government expenditure – holding the economy up from the point of recession.
"It seems that Brown and Darling's more generous interpretation
of their fiscal rules has kept the UK out of contraction, for now," said Mr Snook.
"The news brings to an end 64 quarters of consecutive growth and increases the likelihood that the Bank of England will move to cut rates before the new year."
The official definition of recession is two consecutive quarters of negative growth – and the slowdown now makes this more likely.