Recession set to last for another quarter, as King warns on growth

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The Independent Online

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 NIESR said output in the second quarter had been distorted by the extra Diamond Jubilee bank holiday in June and said the underlying growth rate was probably around 0.2 per cent. But it added that output was still exceptionally weak and the economy had been "broadly flat" for 24 months.

Meanwhile, 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 Britain is being dragged down by the eurozone crisis.

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 better news on manufacturing. Output was 1.2 per cent up in May on the previous month according to the Office for National Statistics.