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Hopes the recession is coming to an end were fuelled today after figures showed the economy did not shrink by as much as feared earlier this year.
Economic output fell 0.7% in the second quarter of the year, marginally better than the 0.8% initially reported a month ago and a vast improvement on the shocking 2.4% slump in the first quarter.
The revision was driven by better performances in manufacturing as carmakers reopened production lines and it is now hoped the UK will return to growth in the current third quarter.
But despite the improvement, output was still down 5.5% on a year ago, the worst figure since records began in 1955 and probably since the Second World War.
“The small improvement cannot obscure the severity of the UK recession,” said David Kern, chief economist at the British Chambers of Commerce.
While output in the UK is still falling, France, Germany and Japan emerged from recession at the end of March.
Alan Clarke of BNP Paribas said: “It seems we have turned the corner and we are emerging from recession. But this is still pretty bad. France and Germany expanded in the second quarter of the year.”
The improvement helped boost sentiment in the City before the bank holiday break and the FTSE 100 index was up 52.59 to 4921.94.
Joshua Raymond, market strategist at City Index, said: “Britain's economy shrank by less than expected and this is helping to boost equity markets today. The revised figure boosts hopes that we could see positive growth next quarter and Britain could follow hot on the heels of France and Germany out of this recession.”
But the pound gained only a little against the euro and the dollar.
Duncan Higgins, senior analyst at currency trader Caxton FX, said: “Traders have remained hesitant to take significant positions on sterling over the bank holiday weekend. Investors remain cautious of overestimating the rate of recovery in the UK, which is still in recession.”
Vicky Redwood of Capital Economics said the recent improvement in output was down to temporary factors such as Government spending and companies which all but stopped production starting work again.
“We continue to think that a sharp rebound in growth is unlikely and that this recovery is more likely to be U, or even W, shaped,” she said.
Reader views (2)
Quote: Keith Price, Luton England. Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK.
Don’t count your chickens yet Keith; you won’t start paying for Browns miracle till after the next election.
Today is just the end of the beginning, not the beginning of the end.
Good luck old chap……….Mick.
- Mickinlondon, london, 28/08/2009 16:33
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Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton England, 28/08/2009 14:41
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