The figures released by the office of national statistics (ONS) showed that the country’s GDP shrank by 0.7% a figure far worse than the predicted 0.2%. The figures will be of grave concern for the British government and chancellor George Osborne as his plans to curb the impacts of the Euro crisis and end the double dip recession that has engulfed the country. The 0.7% drop in GDP is the biggest fall in quarterly UK economic outlook since the first three months of 2009.
The ONS said that the poor weather and additional bank holiday had led to uncertainty in calculating GDP growth for June. Britain’s construction sector was the hardest hit over the quarter, with output decreasing by 5.2pc in the three months to June. The service sector shrank by 0.1% over the quarter whilst industrial output fell by 1.3%.
ONS chief economist Joe Grice said in a press conference: “We’ve always found the concept of recession not an easy one as a statistics agency. We had a sharp fall in output in 2008. It reached its nadir in Q2 2009. There was then a recovery but actually over nearly 2 years we’ve had some months up and some months up and been flattish.”
Analysts are blaming the bad weather and the extra days holiday for the Queens Jubilee for the poor figures, The ONS said it was too early to provide an estimate of the Jubilee effect, but warned that this and very wet weather added “uncertainty” to its calculation of economic activity towards the end of the quarter.
Some traders doubt the accuracy of the figures after the ONS has previously released figures that clash with independent bodies. More often than not the ONS data is far worse than those of the other stats companies which have caused confusion over the true state of the UK economy.
In contradiction to the gloomy forecast being bandied about by the ONS and other agencies most economists expected the UK to return to minor growth in the third quarter, as the London Olympics offer a one-off boost through ticket sales and visitors spending some also argue that increasing employment levels suggest the economy is healthier than the headline GDP figures suggest.
As the news was released the Pound has dropped against many of its peers including the Euro and US Dollar.
The Pound to Euro exchange rate is currently trading at 1.276
The Pound to US Dollar exchange rate is currently trading at 1.548
The Pound to Australian Dollar exchange rate is currently trading at 1.508
The Euro to US Dollar exchange rate is currently trading at 1.212
The Euro to Pound exchange rate is currently trading at 0.783
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