UK Q2 recession not as bad at thought

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UK Q2 recession not as bad at thought

UK Q2 recession not as bad at thought
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Britain’s economy shrank less than had first been thought in the second quarter of the year.

The latest reading by the Office for National Statistics was that GDP fell by 0.5 percent between April and June. The initial estimate was 0.7 percent.

Economic growth in that period suffered from one-off factors including unusually wet weather and an extra public holiday to mark Queen Elizabeth II’s 60 years on the throne.

Economists expect a modest rebound from July, but business surveys continue to be gloomy.

That keeps the pressure on the British government to find ways to stimulate growth and on the Bank of England to lower interest rates or buy more bonds.

“The headline is a bit less frightening but the bottom line is pretty much the same: the UK economy has shrunk for three consecutive quarters,” said Vicky Redwood of Capital Economics.

“Given the drags from the fiscal squeeze, euro zone crisis and high domestic debt levels, we still doubt that a strong recovery lies ahead.”

Smaller falls in construction and industrial output were behind the upward revision.

Consumer spending fell 0.4 on the quarter, while exports dropped 1.7 and imports rose 1.4 percent.

Net trade shaved 1.0 percent off GDP, the biggest drag on growth from trade since the second quarter of 1998. A build-up in firms’ inventories added 0.5 percent to GDP.

The UK economy slipped into its second recession in four years around the turn of the year as the ongoing eurozone debt crisis hurt exports and uncertainty made businesses reluctant to invest.

There is also pressure from the government’s austerity drive.