Finance News

Second Quarter GDP Figures Revised Up – But We’re Still in Recession

The growth figures for the UK economy in the second quarter of this year have been revised up, meaning that the economy has no longer shrunk by 0.7%. Instead, it has only shrunk by 0.5%, which is the biggest drop since 2009 and means that Britain is still stuck in a double-dip recession, the first since 1975 and the longest since the 1950s.

This means that the economy will certainly remain stagnant throughout 2012, as the third and fourth quarters of this year would need to be extremely good to make up for the 0.3% and 0.5% drops that we’ve had so far.

Dhaval Joshi, the managing editor of independent investment research company BCA, spells out the problem and states why it’s unlikely we will see growth, or even stagnancy, overall in 2012: “We need a V-shaped year to provide enough growth in the last two quarters to balance out the declines in the first two. That could be quite tough to do.

It will not be easy in this environment. We are at the mercy of external forces such as the future of the euro.”

The government has said that despite these figures, they intend to carry on with their economic policy as they believe they are addressing the causes of the problems: “Britain is dealing with some very deep-rooted problems at home and a very serious debt crisis abroad, and that is why the healing of the economy is proving to be a slow and difficult process. Compared to two years ago, the deficit is down, inflation is down, and there are more private sector jobs. [We] will continue to give [our] undivided attention to the economy – for example with recent announcements on infrastructure and lending.”

George Osborne has echoed this sentiment, claiming that he will give “110%” to solving the economy, an announcement which was criticized by economists and mathematicians for demonstrating a misunderstanding of how percentages work.