The preliminary estimate of GDP from the ONS confirmed fears that the UK economy has contracted for the third consecutive quarter. The data showed that GDP, chained volume measure, decreased by 0.7% in the second quarter of 2012. This is the biggest decrease of the past three negative quarters. However, “special events” such as poor weather and changes to the bank holidays, as part of the Queens Diamond Jubilee, mean these figures are more uncertain than usual according to the ONS. Joe Grice from the ONS said “the underlying performance of the economy was probably somewhat better than the headline figure of -0.7% would suggest”.
The three main sectors all saw contraction. Output in production and services industries saw a fall of 1.3% and 0.1% respectively, in the last quarter. However it was construction that did most of the damage again. Decreasing by 5.2% in the quarter, following the 4.9% contraction seen in the first quarter of 2012. The fall reflected the economic slowdown in general and a sharp drop in public spending on social housing and infrastructure projects in particular.
This latest quarterly estimate from the ONS makes negative growth for the year look increasingly likely. The chart below shows the quarter on quarter growth of GDP and indicates that growth of 1.2% in the second half of this year – that required to avoid a fall in GDP for the year as a whole – is quite a reversal.