UK 2Q GDP down 0.8 percent

[July 24, 2009]  LONDON (AP) -- Britain's economy shrank by 0.8 percent in the second quarter, official figures showed Friday, marking the fifth straight quarter of declines in a severe recession and worse than analysts' forecasts of a drop of 0.3 percent.

The economy has now shrunk by 5.6 percent since the second quarter of last year, the biggest drop since quarterly records began in 1955.

The Office for National Statistics said there were continuing declines in both manufacturing and services output.

The second-quarter figure, which is subject to revision, was a marked improvement over the 2.4 percent decline in the first quarter. Unemployment, currently at 7.6 percent, is expected to continue rising.

"The provisional UK GDP figures for the second quarter are shockingly bad and firmly dash any hopes that the UK had already pulled out of recession," said Vicky Redwood, economist at Capital Economics.

She said the full-year fall in economic output could be as much as 4.5 percent.

Output fell despite recent hopeful signs in rising retail sales, increasing home lending and some reports of higher house prices. Friday brought a report of rising car production.

The International Monetary Fund has forecast that Britain's economy will not return to growth until next year, and then only at a weak level. Britain's central bank, the Bank of England, has taken drastic steps to spur growth, slashing interest rates to a record low of 0.5 percent and increasing the supply of money in the economy.

Increased car production in June marked the beginning of a recovery, said Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders. The society said car production in the U.K. was down 30 percent from a year ago, but that was better than the 50 percent fall for the first six months of the year. Total vehicle production including commercial vehicles was down 34.5 percent in June.

Construction fell 2.2 percent in the second quarter, putting it nearly 15 percent below the same quarter last year, the biggest year-on-year decline on record.

The figures came a day after the agency reported that retail sales rose 2.9 percent in June compared to a year earlier.Retail sales, which have remained fairly buoyant through the recession, were up 1.2 percent from May, when sales were down 0.9 percent from April.

The British Bankers' Association said Thursday that gross lending, excluding redemptions, rose for the first time since April 2008 to 7.9 billion pounds. Net lending was 2.6 billion pounds, below the average of 3.1 billion pounds in the preceding six months.

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On the Net:

Office for National Statistics:
http://www.statistics.gov.uk/pdfdir/gdp0709.pdf

[Associated Press; By ROBERT BARR]

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