The dismal figures from the Office for National Statistics yesterday underline the fact that the UK economic recovery had run into significant trouble even before the eurozone debt crisis took a lurch for the worse during the summer.
The ONS said UK gross domestic product grew by just 0.1% in the three months to June, rather than the already anaemic 0.2% calculated previously.
It also cut its estimate of growth in the first quarter from 0.5% to 0.4%. UK GDP fell by 0.5% in the final quarter of last year.
This means GDP in the three months to June this year was no higher than that in the third quarter of 2010.
The data will make unhappy reading for Chancellor George Osborne, whose hopes of a private sector boom to take up the slack from swingeing cuts in public spending have not been realised.
UK household spending plunged 0.8% in the second quarter, the ONS data showed, highlighting the pressure on consumers. This was the fourth straight quarterly fall in household spending.
Revisions to past data revealed that the 2008/09 recession was significantly deeper than thought, with a peak-to-trough fall in GDP of 7.1% as opposed to the 6.4% drop calculated previously.
A key survey of UK services, published yesterday by the Chartered Institute of Purchasing and Supply, revealed that this dominant sector of the economy defied expectations
of a further slowdown in its growth in September. However, the survey was not sufficiently strong to change the overall picture of a UK economy facing a significant danger of a double-dip recession.
CIPS’ headline business activity index for services rose from 51.1 in August to 52.9 in September. However, the albeit slightly increased growth signalled by the September figure was below the long-term average.
Employment in the services sector grew only marginally in September, after falling in each of the preceding two months.
Jonathan Loynes, chief European economist at consultancy Capital Economics, said: “Q2’s national accounts and September’s CIPS report on services brought further bleak news on the UK economy. Not only was the recession back in 2008/09 deeper than previously thought, but the economy is on the brink of a renewed contraction.”
Mr Loynes declared that a composite of CIPS’ readings for services, manufacturing, and construction in the three months to September “suggests that GDP may well have fallen during the quarter”.
Highlighting the likelihood the Bank of England would move soon to increase the scale of its boost to UK money supply beyond the current £200bn to stimulate the economy, Mr Loynes said yesterday’s GDP data and CIPS’ services survey “may just tip the balance” towards a move at the end of the Monetary Policy Committee’s two-day meeting at noon today rather than next month.
