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Recession is even worse but ‘rally is on the way’
Robert Lea27 Mar 2009
Britain has been in a deeper recession than was first feared, official figures have revealed.
But members of the Bank of England's monetary policy committee are today insisting the first green shoots of recovery may be about to sprout.
The Office for National Statistics today reported GDP, the measure of the economy's health, dropped by 1.6% in the last three months of 2008 compared with the third quarter of the year.
That is worse than the ONS's original estimate of a 1.5% contraction in the economy and does not bode well for the first official GDP estimates for the first quarter of 2009, out later next month.
Those figures are expected to show a further fall in GDP in the first three months of this year.
That will be the fourth consecutive quarter that the economy has not grown following the official zero growth figure for the April to June quarter of 2008 and a third-quarter decline of 0.6%.
The UK economy has not sunk at this rate since 1980, making this recession already even deeper than that in 1992.
Within the data were figures that showed household spending hit by rising joblessness contracted at a rate of 1%, far faster than thought.
Those who are earning are squirreling away their cash, evidenced by a sharp rise in savings, further indicating consumer retrenchment.
Global Insight economist Howard Archer called the downward revisions “depressing” adding: “The overall decline in GDP would have been even larger but for robust government spending and an even deeper fall in imports than exports.”
He continued: “Worryingly, latest data and survey evidence point to GDP contraction at least matching the fourth-quarter 2008 drop in the first quarter of 2009.
“Furthermore, the economy is clearly entering the second quarter still strongly in reverse. Consequently, we now suspect that the UK economy will contract by around 4% this year.”
Bank official and MPC member Spencer Dale was attempting strike a more optimistic note, however.
He told an audience of institutional shareholders in London today: “The darkest hour is just before the dawn.
“Although immediate prospects appear bleak, the substantial economic stimulus that is under way means that there are grounds for thinking that economic conditions may start to improve later this year.” Those comments were echoed at the same Association of British Insurers conference by the MPC's latest recruit, Morgan Stanley chief economist David Miles, replacing David “Danny” Blanchflower, the MPC member who warned loudest about the coming of the financial storm.
“There are coherent reasons to be relatively optimistic on the UK outlook,” said Miles. “There has been a massive and recent policy response. The monetary and fiscal stance is set to be highly stimulative.”
Reader views (8)
"Britain has been in a deeper recession than was first feared, official figures have revealed."
It is perhaps more likely that it has been a lack of both honesty and transparency that has prevented the public from being informed of the truth of how bad this really is and how much worse it's going to get before it truly starts getting better (for the long-term)!
- Fraser, Telford Park, 30/03/2009 08:56
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I read a very wise comment the other day: 'The only cure for a depression is a depression'. Until this thing has has run its course naturally, there can be no real recovery. The authorities may be able to 'buy' a bit of a bounce, and Brown is hoping desperately that will get him relected. But a real recovery will only happen when the imbalances have been wrung out of the economy, not increased by spending the last dregs of our money to produce a false bounce. That will only make things worse in the longer term. Brown is a devalued Prime Minister of a devalued government.
- Anthony, London, 29/03/2009 09:30
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I can guaranatee you they haven't a clue. It could last 6 months or six years - economists don't know. As for QE, it didn't work in japan, it may not work here. And even if it works, they have to know when to turn off the tap... and they won't. So, it will be awful, whatever. Lock up your money - or better still convert it into gold because this lot might have misjudged the deflation thing - in which case inflation will go through the roof after QE.
- Simoninkent, kent, 28/03/2009 22:27
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About time these idiots realised we know things are going to get worse and stop lying to us. But then these people still earn fortunes and are hardly affected by the recession. The bankers and rating agencies, calling a junk bond AAA+ have commited gross fraud and until they are brought to justice matters we will never recover. Watch the protests this week and you will understand.
- Lemar, london, 28/03/2009 17:12
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They didnt see it coming, they have no idea how long it will last and they wont even realise when its gone! Experts!! Most dangerous people on the Planet, no use to anyone, not even themselves!
- Pedro, Dubai UAE, 28/03/2009 12:06
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Bears, bulls, green shoots, black swans, white swans, darkest before the dawn, fingers crossed (Banks of England remember?) dead cat bounce etc. All this is about maintaining Pre GFC wealth at the taxpayers expense.
Let them all fail and lets get on with it.
- Laverack, Oz, 28/03/2009 03:23
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What a shock? Us thicko's on the street would never have guessed as far to stupid.
It's about time more normal, outspoken, non privileged people off the street got into Politics and stood up and do what where good at. Speaking the truth, calling a "tree a tree" and telling jumped up, anus spilling think they know it all individuals the truth. The hardworking, down to earth taxpayer then will understand where they stand and together build the bricks back for GREAT BRITAIN.
- Theresa, London, 27/03/2009 18:38
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spring has sprung, the grass has ris, i wonder where the bankers is,
mostly avoiding the streets of London over the next few days and possibly taking a short break in exotic places on the mega bonus's. whilst talking up the economy from the blackberries in the vain hope they might actually fool all of the people all of the time.
history dictates that recession, depression, call it what you may is a long lived beast that refuses to pass quickly.
- M.O'Brien, london.uk, 27/03/2009 17:57
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