The economy contracted again in the second quarter of 2012, extending Britain's double-dip recession, the National Institute of Economic and Social Research said yesterday. The NIESR estimates that there was a 0.2 per cent fall in output between April and June. Many City economists are also expecting output to shrink over the period. The Office for National Statistics is due to deliver its first estimate of GDP over the second quarter later this month.
The NIESR said that output in the second quarter had been distorted by the extra Diamond Jubilee bank holiday in June and said that the underlying growth rate was probably around 0.2 per cent. But it added that output was still exceptionally weak and that the economy had been "broadly flat" for 24 months.
And the Governor of the Bank of England, Sir Mervyn King, warned yesterday that the economy "doesn't show a great deal of signs of impending recovery". He added that he is concerned that Britain is being dragged down by the eurozone crisis. "I am worried about the outlook for exports because sterling has risen over the past year and that's going to be a challenge and because of the state of euro area" he said.
That was supported by official trade figures yesterday showing a further decline in exports to the eurozone over the past three months, with volumes down 7.2 per cent on the same quarter of 2011. By contrast, exports to the rest of the world rose 13.2 per cent on the same period of last year. The overall trade deficit narrowed slightly in May, falling to £8.4bn, down from £9.7bn in April.
There was also some better news on manufacturing, with output rising by 1.2 per cent in May on the previous month according to the ONS. However, this jump was ascribed to the addition of an extra working day in the month, after the bank holiday was shifted to June, rather than a pick-up.
British export volumes rose 8.9 per cent month on month in June following a 9.8 per cent month-on-month contraction in May.