May 18, 2013
UK recession deepens
Britain fell deeper into recession than initially thought in the first quarter of 2012 due to a slump in construction output, raising the likelihood that the Bank will opt to inject more stimulus to protect the economy from the euro zone debt crisis.
Britain is in its second recession since the 2007-2008 financial crisis, and the prospects for a recovery are cloudy as leaders in the euro zone, Britain's biggest trading partner, are still far from resolving their debt woes.The Bank's Monetary Policy Committee (MPC) has indicated it is ready to pump more money into the economy, having paused its quantitative easing programme at 325 billion pounds this month, amid growing worries about a break-up of the currency union.
"The economy is not recovering properly and with the uncertainty over Europe hanging over the outlook as well, our suspicion is the MPC will sanction further QE at some point later on this year," said Philip Shaw, economist at Investec.
The Office for National Statistics said the economy shrank by 0.3 percent in the first quarter of this year, more than an initial estimate of a 0.2 percent decline, and confounding analysts' forecasts for an unchanged reading.
Year-on-year, the economy contracted by 0.1 percent, the first annual decline since Q4 2009.
The figures will make uncomfortable reading for British finance minister George Osborne, who has vowed to press ahead with harsh austerity measures to curb Britain's debts and has argued that the private sector can fill the gap in public spending.
Britain's economy has expanded by just 0.3 percent since the Conservative/Liberal Democrat government came to power in 2010, and Thursday's figures showed government spending made the biggest contribution to the economy.