UK recession deepens as GDP revised lower
Official figures released by the Office for National Statistics today have revealed that UK Gross Domestic Product (GDP) shrank by 1.6% in the fourth quarter of 2008, revised from an earlier estimate of 1.5%.
The figures represent the worst performance since the second quarter of 1980 and confirms that the UK fell into an even deeper into recession in the last three months of 2008 than previously thought.
The downward revision was a result of worse than previously expected output in the construction sector, due to the slump in demand for new houses. Output in construction plummeted by almost 5% during the last three months of 2008.
On an annual basis, GDP fell by 2%, more than the 1.9% previously forecast, and the steepest year-on-year fall in almost 18 years.
As a result, analysts are expecting the UK economy to shrink in 2009, while Spencer Dale, the Bank of England’s chief economist, is forecasting that the UK economy would probably recover at the end of this year.
Mr Dale believes that more action is required by policymakers, in particular, improving the availability of credit to boost consumer confidence.
In a bid to stave off a prolonged recession, the central bank has cut interest rates to a record low of 0.5% and has already implemented quantitative easing (also known as printing money) – a process whereby the Treasury injects funds into the financial system to ease pressure on banks by giving them extra capital.