But initial collapse in output following financial crash was bigger than first thought, Office for National Statistics says
Britain never suffered a double-dip recession in 2012 but suffered a deeper collapse in output following the financial crash than previously thought, according to new data that show the economy is even further away from a full recovery.
The Office for National Statistics has reworked its quarterly growth figures for the beginning of last year to show a flat performance instead of previous estimates of a 0.1% decline. Without a fall in GDP in the first three months of 2012, Britain did not suffer two consecutive quarters of negative growth that would have resulted in its second recession in three years – otherwise known as a double-dip.
The ONS said, however, that the first post-crunch recession in 2008/2009 was deeper than first estimated, meaning that economic output is now 3.9% lower than its pre-crash peak, compared with a previous estimate of 2.6%.
David Tinsley, UK economist at investment bank BNP Paribas, said the figures revealed a weak economy in need of further stimulus from the Bank of England.
"The data highlights both the damage done to the economy following the crisis and the size of the challenge still facing it to rebalance. Unless it bounces considerably it raises serious concerns that after a solid second quarter, growth will at best be weak. These are good arguments for new Bank of England governor Mark Carney to consider a significant easing in policy as early as next week."
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| George Osborne will be cheered that the double dip has been erased from the economic history books |
Carney takes over from Sir Mervyn King on Monday and is under pressure in some quarters to take a more active role than his predecessor. But the nine-strong monetary policy committee that he will head has shown little appetite in recent months to pump further central bank funds into the economy, under the £375bn quantitative easing programme. King and two other committee members have voted since February to increase the QE stock by £25bn, only to be blocked by the remaining six.
Jeremy Cook, the chief economist at the foreign exchange firm World First said Carney and the chancellor need to take further action to bring about a sustainable recovery.
"Whether the UK entered a double-dip or - as today's numbers show, it didn't - matters little to the man on the street who is seeing large falls in real-term wage growth as a result of the lack of business output. Sterling has fallen in the aftermath of this announcement, and although this data is three months old and could be considered stale, the lack of real improvement since leaves the government and the new Bank of England governor a lot to do."
Coming a day after George Osborne was forced to announce a further £11.5bn of cuts to government spending in 2015/16, the news that a double-dip recession has been written out of the economic history books will cheer the Treasury. Ministers have battled to show that the economy was healthier than official statistics showed during the turbulent years of 2011 and 2012, which were marred by the euro zone crisis and fears that the currency zone would break up.
Separate figures revealed the economy is further away from getting back to its early 2008 peak and disposable incomes are at levels last seen in 1987. The ONS said the downturn in 2008/09 saw GDP decline by 7.2%, from the previous estimate of 6.3%.
A deeper recession and a prolonged period of low growth leaves the government with a higher mountain to climb to restore the economy back to health, said analysts.
Figures showing a long-term fall in disposable incomes emphasised the difficult task facing the Treasury as it struggles to boost consumer confidence and high street spending, both of which remain weak. Household disposable income fell by 1.7% in the first three months of 2013 compared with the previous quarter, which left it down by 0.3% year on year.
Howard Archer, the chief UK economist at IHS Global Insight, said the fall "undoubtedly reflected higher inflation, very low wage growth and faltering employment at the start of the year".
Consumer spending continued to rise, however, which Archer said was partly financed by a drop in the household savings ratio to 4.2% from 5.9% in the fourth quarter of 2012 and 7.1% in the third quarter. "This highlights the fact that consumers do still face serious headwinds," he said.
Chris Leslie, Labour's shadow financial secretary to the Treasury, said the revised figures showed the economy has grown by 1.1% since 2010, compared to the 6% forecast at the time.
"That's why living standards are falling and the deficit is not coming down."
Article Source : http://www.guardian.co.uk
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