GDP data dash hopes UK out of recession
By Jane Wardell |
October 24, 2009, Saturday
|
Print Edition
Print Edition
THE British economy shrank 0.4 percent in the third quarter of this year, according to official data released yesterday, dashing hopes that the country had emerged from a slump.
The fall in gross domestic product for the sixth consecutive quarter takes the total loss of output since the slump began last year to 5.9 percent, leaving the United Kingdom in the grip of the longest period of continuous decline since the statistics office began taking records in 1955.
Economists had expected the update from the Office for National Statistics to be a close call between growth and contraction -- but most had plumped for slight growth and few had forecast a fall of that size.
The persistent decline comes despite attempts by the government and Bank of England to boost the economy, including holding interest rates at a record low of 0.5 percent since March, an unprecedented 175 billion pound (US$290 billion) injection into the money supply and billions more through fiscal measures.
The pound dropped more than 1 cent to US$1.65 after the economic update as markets factored in the likelihood that the central bank will now increase the so-called quantitative easing program -- buying assets from banks to boost the amount of money in the economy -- when it meets next month.
"Sterling is taking a hit on surprisingly weak GDP figures which means that the UK is not following France and Germany out of recession," said Arifa Sheikh-Usmani, an equity trader at Spreadex Ltd.
Both Bank of England Governor Mervyn King and Treasury Chief Alistair Darling have said they expect some modest growth by the end of this year.
But economists have warned of a so-called "double dip," or "W-shaped" recession as pressures intensify next year when some stimulus measures come to an end.
The fall in gross domestic product for the sixth consecutive quarter takes the total loss of output since the slump began last year to 5.9 percent, leaving the United Kingdom in the grip of the longest period of continuous decline since the statistics office began taking records in 1955.
Economists had expected the update from the Office for National Statistics to be a close call between growth and contraction -- but most had plumped for slight growth and few had forecast a fall of that size.
The persistent decline comes despite attempts by the government and Bank of England to boost the economy, including holding interest rates at a record low of 0.5 percent since March, an unprecedented 175 billion pound (US$290 billion) injection into the money supply and billions more through fiscal measures.
The pound dropped more than 1 cent to US$1.65 after the economic update as markets factored in the likelihood that the central bank will now increase the so-called quantitative easing program -- buying assets from banks to boost the amount of money in the economy -- when it meets next month.
"Sterling is taking a hit on surprisingly weak GDP figures which means that the UK is not following France and Germany out of recession," said Arifa Sheikh-Usmani, an equity trader at Spreadex Ltd.
Both Bank of England Governor Mervyn King and Treasury Chief Alistair Darling have said they expect some modest growth by the end of this year.
But economists have warned of a so-called "double dip," or "W-shaped" recession as pressures intensify next year when some stimulus measures come to an end.
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