GDP figures revised: recession not as bad as was first thought

Aug 24, 2012

Economy 'only' shrank 0.5 per cent in Q2, but the outlook is still bleak say economists

THERE was a modicum of good news for the UK economy today when revised data from the Office for National Statistics showed that the country's GDP shrank less than had been feared between April and June.

It now appears that the economy contracted by 0.5 per cent during the quarter, less than the 0.7 per cent that was announced last month.

That fall is also being blamed on the Queen's Diamond Jubilee celebrations. The Bank of England has claimed that the long weekend in early June could have knocked around half a per cent off UK growth.

"This implies that underlying growth – excluding the Jubilee bank holiday effect - has been flat rather than negative," explained The Daily Telegraph. But it also noted that, whatever the cause of the contraction, it was still "the biggest quarterly fall in UK GDP since the first quarter of 2009".

The revised figures are still a lot worse than had been expected before the announcement last month and most observers think the bleak times will continue.

"It is worth remembering that the preliminary estimate of GDP was much worse than expected. So even now, GDP is still estimated to have fallen by more than the 0.2 per cent drop that the consensus expected ahead of the initial estimate," Vicky Redwood, chief UK economist at Capital Economics, told The Times.

"The revision is very small in the big picture and means that output is still more than four per cent below its pre-recession peak... We still doubt that a strong recovery lies ahead," she added.

Neither have the revised figures led to a change in outlook at the Bank of England which still estimates zero growth for the year as a whole.

BBC economics correspondent Hugh Pym noted: "The underlying picture is unchanged - the economy is stagnant and it’s not clear where growth is going to come from."

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