The UK's double-dip recession is ongoing, with the economy shrinking for a third consecutive quarter.
UK economy shrank by 07% in second quarter of 2012
The UK economy contracted by 0.7% in the second quarter of 2012. This is according to the Office for National Statistics' (ONS) preliminary estimates of growth in gross domestic product (GDP), released today (Wednesday 25 July 2012).
The latest ONS data therefore confirm also that the UK economy spent the first half of 2012 in negative territory. The economy contracted by 0.3% in the first quarter of 2012 (and, before that, by 0.4% in the fourth quarter of 2011).
Indeed, as economist David Blanchflower notes, these figures mean that we have now seen "three quarters of negative growth in a row and five of the last seven."
Economist Chris Dillow has tweeted the following on why the UK economy contracted so sharply in Q2 2012: "Of the 0.7% drop in GDP, half was due to falling construction, 0.2pp to lower ind.prod & 0.2pp to private services."
Can the economy rebound in the second half of 2012?
So what chances are there that economic growth might rebound in the second half of 2012 (the third and fourth quarters of this year)?
It is possible that the imminent Olympics will boost growth in the third quarter of 2012, creating a so-called "Olympic bounce" for the UK economy. But thereafter, prospects for growth are more uncertain. This could prove to be consistent with Bank of England Governor Mervyn King's prediction at the start of this year that we could expect "a zigzag pattern of alternating positive and negative quarterly growth rates."
- The British Chambers of Commerce (BCC) says "UK GDP growth is set to improve from Q3 2012."
- NIESR: "The UK economy has ceased to contract, but economic activity remains very weak. With the economy stagnant, the negative output gap is likely to widen further. We expect the UK economy to remain broadly 'flat' over the next 6 months. While significant downside risks persist, we expect economic recovery to begin to take hold in 2013. [...] We do not expect output to pass its peak in early 2008 until 2014."
- RBS analyst Ross Walker says the manufacturing sector has suffered "a collapse [..] a huge decline" over recent months. Walker believes this will hit growth in the wider economy later in the year.
- XpertHR economic commentary July 2012: Black clouds Read XpertHR's assessment of economic prospects for the second half of this year.