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GDP Falls Again

GDP Chart

The UK recession has deepened; latest official figures have shown, after the output of the economy fell by 0.7% between April and June.  The contraction was much bigger than expected and follows a 0.3% drop in the first three months of the year.  The graph on the left shows that the economy was recovering following the bank crisis under Labour, but since the general election and the introduction of the austerity regime by Osborne the economy has declined. 

 

The Office for National Statistics said the fall was largely due to a sharp slowdown in the construction sector.  It said it was not yet sure of the size of the effect of the poor weather and the extra June bank holiday.  This means that these figures, which are the first estimate for what happened in the economy between April and June, are more uncertain than usual.

 

"The bottom line from all this is that the underlying performance of the economy was probably somewhat better than the headline figure of -0.7% would suggest, having regard to the extra bank holiday and to the poor weather," said Joe Grice from the ONS.  "How much that effect might be is something we won't be able to say or to quantify until we have further experience against which to judge."

 

The figures could be revised in the coming months as more information comes in.  The first estimate is largely based on information the first two months of the three-month period.

 

In response, shadow chancellor Ed Balls said the figures showed the government's economic plans had failed.  "If these figures don't make the chancellor wake up and change course, then I don't know what will," he said.  "Thank goodness the Olympics will give our economy a much-needed shot in the arm.  But this short-term boost is not enough - we need a plan B now to get the economy moving again and radical reforms to set Britain on a new course for jobs, growth and long-term prosperity.  These shocking figures speak for themselves. As we warned two years ago, David Cameron and George Osborne’s ill-judged plan has turned Britain’s recovery into a flatlining economy and now a deep and deepening recession."


A new policy to stimulate demand is urgently needed, real money into the hands of consumers through a cut in VAT, a public serctor house building programme and immediate investment in infrastructure.

 

 

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