As the UK economy grows at a slower rate than expected and British household expenditure shrinks, one economist tells Channel 4 News we are “very close” to a double dip recession.
Gross domestic product (GDP) grew 0.1 per cent in the second quarter, downwardly revised from previous estimates of 0.2 per cent.
The near-stagnant growth was largely caused by a 0.8 per cent drop in consumer spending, the biggest drop in more than two years, and a 1.2 per cent decline in the production industries.
Jonathan Loynes, Chief European Economist at Capital Economics told Channel 4 News the country is “very close” to a double-dip recession.
He added: “I don’t think we’re looking at another recession like 2008 but it’s quite clear the recovery has slowed down pretty sharply.”
The 0.8 per cent drop in consumer spending is the fourth consecutive fall.
Jonathan Loynes said the figures highlighted the financial pressure people are under: “We’re absolutely seeing a household recession.
“For households, the recession is now. It wasn’t back in 2008/2009.
He added that the measures taken to combat the economic turmoil two years ago are now hitting home.
“People already have huge debt and low savings so they are not ready to respond to a fall in income.”
Elsewhere, the ONS revealed growth in the first quarter of 2011 was revised down to 0.4 per cent from 0.5 per cent and the recession in 2008/09 was much deeper than previously thought but ended a quarter earlier than first estimated.
For households, the recession is now. It wasn’t back in 2008/2009. Jonathan Loynes, economist
The revisions come following an annual rebalancing of accounts known as the Blue Book exercise, which involves changes to methodology.
The troubling data is released amid mounting fears over the health of the world economy, driven by the eurozone debt crisis, sluggish growth in the US and weak industry data in the UK and Europe.
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The figures will come as a blow to Chancellor George Osborne who has come under increasing pressure to reconsider his strict package of austerity measures amid signs the economy is in trouble.
But a spokesman for the Treasury said: “The economy is recovering from a recession we now know was deeper than we thought and the deepest of any major economy except Japan.
“Add to this the high levels of debt, particularly in the financial sector, which has been a drag on growth for the last six quarters, and it is clear that the recovery was always going to be difficult.”
He added: “The Government will stick to the deficit reduction plan which has won the UK credibility and stability, but the most important thing for the economy now is restoring confidence, which will depend on the eurozone decisively dealing with its problems.”