Recovery slows as GDP grows 0.2 per cent

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The Independent Online

The UK's economic recovery slowed in the second quarter of 2011 after official figures estimating GDP growth of 0.2% were unrevised today.









The downturn, which followed the biggest fall in activity for manufacturing and other production industries in two years, was down on the 0.5% increase in the previous quarter, the Office for National Statistics (ONS) said.



The ONS has already said that a number of seasonal factors, such as the royal wedding and the unusually hot spring clouded the picture, and real growth could be up to 0.5 percentage points higher as a result.







Samuel Tombs, UK economist at Capital Economics, said the third quarter has the potential to be stronger as the temporary factors flagged by the ONS unwind.



However, he added: "With the forward looking indicators for the third quarter remaining downbeat and recent stock market turmoil clouding the outlook, we strongly doubt that any small pick-up in GDP growth in third quarter will reignite the recovery."



The overall second quarter growth figure was unchanged on the previous month's estimate, despite a greater than previously thought decline in production industries to 1.6% from 1.4%.



This was its biggest fall since the first quarter of 2009 and was caused as food and transport equipment production was lower than previously expected.



There had also been the biggest falls in mining and quarrying output since 2006, while electricity, gas and water supply also fell, partly as a result of the hot weather in April.



The powerhouse services sector, which accounts for some three-quarters of the economy, saw growth of 0.5%, which was unchanged from the previous estimate.



This was despite figures showing that transport, storage and communications grew less than previously thought, driven by a slowdown in the telecommunications industry.



However, this was offset by a greater than previously thought rise in hotels and restaurants and business services and finance. Separate figures showed that the services sector grew by 1.6% in June.







Today's figures mean UK output has grown 0.7% year on year as it struggles to gain momentum following the recession and amid the Government's austerity cuts.



It has effectively flatlined in recent months after the 0.5% growth in the first quarter of 2011 merely offset a decline of 0.5% in the final quarter of 2010.



The services sector has seen only lacklustre growth as household incomes are squeezed by rising inflation.



Manufacturing has also suffered a slowdown in recent months amid the squeeze in consumer spending and as exports come under pressure from the eurozone debt crisis.

PA

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