UK heading back into recession, says OECD
Thursday 29 March 2012
The UK has slipped back into recession after the economy contracted in the first quarter of 2012, an influential think-tank warned today.
Gross domestic product (GDP) - a broad measure for the total economy - is on course to have fallen by about 0.1 per cent in the three months to the end of March, the Organisation for Economic Co-operation and Development (OECD) said.
The gloomy forecast comes after official figures revealed the economy contracted by 0.3 per cent in the final quarter of 2011, which was worse than the previous estimate of a 0.2 per cent fall.
A decline in the first three months of 2012 will mean the UK is officially back in recession, which is defined as two quarters in a row of declines.
The OECD also warned the recovery for the world's biggest economies would be fragile, with the outlook for Europe "very weak".
The worse than previously thought contraction in the UK in the final quarter of 2011 meant the economy entered 2012 in a worse position than previously thought.
But economists are divided as to whether GDP will fall in the first quarter of the year. A number of upbeat surveys have suggested a return to mild growth in the quarter.
And any slump would be modest compared with the 2008/09 recession and the OECD predicts a return to growth in the second quarter of the year.
The Office for National Statistics today said the powerhouse services sector grew by 0.2% between December and January, after a slight decline in the final quarter of 2011.
However, it is generally agreed that the UK's economic growth will be feeble for the first half of 2012 at least, although falling inflation should increasingly deliver a boost to consumer spending as the year progresses.
The Government's independent forecaster, the Office for Budget Responsibility, predicts the UK will avoid a recession but the economy will grow by just 0.8% over the course of 2012.
Philip Shaw, an economist at Investec, predicts the economy will grow by 0.3% in the first quarter of the year.
He said: "Recent indications suggest the UK's economy will have expanded in the first quarter. Our own view is that the OECD is being too gloomy.
"The services sector appears to have strengthened, the manufacturing sector is recovering since the end of last year and there's been signs of strength in retail spending."
Meanwhile, the OECD warned of a two-speed recovery developing in the G7 nations, with North America enjoying a rapid expansion but Europe weighed down by austerity measures.
The OECD said the recent hikes in oil prices, which have pushed Brent crude to above 120 US dollars a barrel, would push inflation up higher than it previously thought, wiping up to 0.2% from growth across G7 nations over the next year.
It expects Italy. which is already in recession, to contract for te first two quarters of 2012, while France will contract in the first quarter and Germany's growth will be lacklustre.
In November, the OECD warned the eurozone crisis was a key risk for the UK economy and it today called for the firewall to be increased in size to help prevent the crisis worsening.
It last year slashed the UK's 2012 growth forecast to just 0.5% from 1.8% earlier in the year and said it expects unemployment to hit 9.1% by 2013, putting another 400,000 people out of work.
- 1 Stem cells that can kill cancer have been engineered by scientists
- 2 Ricky Gervais and Dame Judi Dench back campaign to stop Thailand dog meat trade
- 3 Russell Brand says he will 'probably' give up acting to focus on his revolution
- 4 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
- 5 Queen's first tweet: Reply telling Her Majesty to 'f*** off' broadcast on BBC News
Stem cells that can kill cancer have been engineered by scientists
Ottawa shooting: 'Sergeant-at-arms shot suspect at point-blank range after diving around pillar'
Russell Brand says he will 'probably' give up acting to focus on his revolution
McKamey Manor: This 'extreme' haunted house is the stuff of nightmares
Jack Bruce dead: Cream bass player dies of liver disease aged 71
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Tony Blair 'says Ed Miliband will lose 2015 general election'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Putin: The US is to blame for almost all the world's major conflicts
Attacks on 'Ukip Calypso' show how skewed people’s priorities are
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...