The UK economy failed to achieve any growth at all in the second quarter - according to official data yesterday which fuelled fears of outright recession.

The Office for National Statistics, which had last month estimated UK gross domestic product grew by 0.2% between the first and second quarters, said yesterday that it had actually been flat in the three months to June. This was the worst outturn since the last recession in the early 1990s - specifically the second quarter of 1992.

Household spending fell 0.1% during the three months to June - the weakest outturn for this key component on the expenditure side since the second quarter of 2005. Total domestic demand fell 0.3%, with only a significant fall in imports preventing contraction of GDP in the three months to June.

Geoffrey Dicks, economist at Royal Bank of Scotland, said: "Domestic demand has fallen for two successive quarters - recession at home offset by small positive contributions from net exports."

On the output side, growth in the UK's dominant service sector in the second quarter was revised down by the ONS yesterday from 0.4% to 0.2%. This was the poorest expansion recorded by the service sector since the fourth quarter of 1995.

The ONS yesterday revised the drop in construction sector output in the second quarter from 0.7% to 1.1% - the biggest fall since the third quarter of 2005.

A 5.3% tumble in total investment during the second quarter alone was taken by economists as a reflection of the collapse in housebuilding.

Mounting fears of UK recession, and expectations that the Bank of England will eventually have to cut UK interest rates further, sent the pound plummeting on the foreign exchanges yesterday.

Sterling was last night trading around $1.8538 - nearly two-and-a-half cents weaker than its close in London on Thursday against the US currency.

The pound was also weaker against the euro, with the single currency last night up about half-a-penny on its Thursday close in London at around 79.8p.

On its trade-weighted index against a basket of currencies, the pound yesterday fell to its poorest level since late 1996.

Technical recession is defined as two consecutive quarters of contraction of GDP.

Jonathan Loynes, chief European economist at London consultancy Capital Economics, said yesterday: "With GDP growth grinding to a complete halt in Q2 and most forward-looking indicators still pointing downwards, the UK economy looks almost certain to head into a technical recession over the coming quarters. Although some downward revision to the provisional growth estimate of 0.2% was expected, the news that the economy did not grow at all in Q2 is a clear blow."

He added: "We still expect GDP to contract slightly in both Q3 and Q4 - giving a technical recession - with GDP growth averaging just 1.2% or so in 2008 overall."

The UK grew by 3.0% in 2007, before the global credit crunch hammered activity. Its trend rate of growth is around 2.5% to 2.75%, so Loynes is projecting expansion will be less than half of this longer-term average this year.

The ONS said yesterday that GDP in the second quarter was 1.4% higher than in the same three months of 2007 - the weakest year-on-year growth rate since the fourth quarter of 1992. It had estimated last month that GDP was up 1.6% year-on-year in the second quarter.

Yesterday's dire second-quarter GDP data would seem likely to fuel the debate over interest rates in coming weeks.

However, with benchmark annual UK consumer prices index inflation forecast by the Bank of England to peak at or above 5% in coming months, economists are not holding their breath for a cut in base rates from the Old Lady of Threadneedle Street's Monetary Policy Committee. The MPC cut UK base rates by a quarter-point three times between December and April, and has held them at 5% since as inflation has surged.

Data on August 5 had revealed already that industrial production fell by 0.8% during the second quarter, a much greater drop than the 0.5% decrease assumed by the ONS in its initial estimate of second-quarter GDP last month. Within this, manufacturing output fell by 0.8% rather than the 0.4% estimated initially by the ONS.

Loynes highlighted further trouble ahead for household spending and, given the collapse in new building in the weakening residential property sector, for investment.

He said: "The breakdown of growth by expenditure components made for gloomy reading. Household spending actually fell by 0.1% quarter-on-quarter, despite a solid rise in retail sales, while investment collapsed by 5.3%. With business investment falling by a much smaller 1.9%, residential investment, i.e. housebuilding, must have fallen very sharply indeed."

And he warned: "Both household spending and investment are likely to weaken much further in response to the continued downturn in the housing market."

Loynes noted that, in spite of the boost to GDP from net trade with other countries, UK exports had actually fallen in the second quarter and were likely to drop further, particularly given a weakening economic backdrop in key mainland European market places.

He said: "Net trade made a positive contribution to growth of 0.3%, but only because imports fell. Exports also contracted and are likely to do so further in response to the weakness of activity overseas, particularly in Europe.

Loynes also pointed out that second-quarter GDP could have been weaker had it not been for a £1.38bn jump in inventories during the second quarter.

He said: "Growth would have been firmly negative in Q2 were it not for a big jump in stockbuilding, which boosted GDP by 0.6%. This followed a big drop in stockbuilding in the previous quarter, but it nonetheless raises the risk of an inventory rundown over the next quarter or two, which would obviously depress output further."