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UK recession not as bad as feared, says ONS

London, UK (24/08/2012)

LONDON (Management Today) It looks like the nay-sayers were wrong, as revised estimates from the ONS show that GDP contraction in Q2 was less than we originally thought.


If anyone has been confused about falling GDP alongside falling unemployment (a pretty odd cocktail of metrics), then here’s your answer: the Office for National Statistics got it wrong first time around. In figures released today, the ONS said the economy actually contracted by 0.5% in the three months to the end of June, not the 0.7% it originally calculated. That goes some way to explaining why our economic measures made such contradictory reading over the last few months.
 
The ONS says the difference is because of lack of data when they first made their estimate. At the time, the overall GDP figure could only take into account 40% of construction output data for the period, which showed 5.2% contraction. Now that all the data is available, shrinkage in construction actually only amounts to 3.9%, lending a bump to the overall GDP figure. Good times!
 
Well, not quite. The figures still mean we are in the double-dip recession, but they show that the construction sector and the 100,000 extra jobs created by the private sector this year are having some effect. The eurozone economy is pretty much up the spout these days, so for the UK to keep things on a relatively even keel (Greece’s GDP just contacted 7% in one quarter, for comparison) is impressive. Some analysts are still optimistic that we can get back to modest growth by early next year. Now wouldn’t that be nice…
 
If you’re still feeling down in the dumps about GDP contracting at all, bear in mind that the Bank of England reckons the Diamond Jubilee bank holiday knocked 0.5% off GDP because of the lost working hours. If this one-off event had not happened, then Britain’s economy would have flat lined in Q2, and technically, that would mean we were no longer in recession.
 
But the burning question – which isn’t being answered quickly – is when the eurozone will finally sort itself out. It will remain tough for the UK to get any serious economic traction whilst its primary export market is so depressed. And with talk of a Grexit re-ignited by the media this morning, the situation may get worse before it gets better…

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