Gross Domestic Product (GDP) for the UK increased by 0.2 per cent in the second quarter of 2011, according to figures released by the Office for National Statistics (ONS) today.
This is a drop from the 0.5 per cent growth seen in Q1 with the ONS claiming that several ‘special events’, such as the additional bank holiday, the royal wedding and the Japanese Tsunami, seem to have had an overall negative effect on growth during the period.
Pressure will now build on Chancellor George Osborne to introduce growth-stimulating measures in the autumn, as the UK GDP struggles to match the target of 1.7 per cent for 2011 previously set by the Office for Budget Responsibility.
Although the economy grew by 0.5 per cent in Q1, in the last quarter of 2010 it contracted by the same amount, meaning it has virtually flat-lined since October last year.
The Chancellor remained defiant when responding to today’s figures however, choosing to focus on the positive news that the economy is still growing and jobs are still being created.
Drawing on the bail out of Greece by the Eurozone countries and the US federal debt crisis, Osborne added: “It is positive news too that at a time of real international instability we are a safe haven in the storm.”
Retail, despite being the biggest private sector employer in the country, has “not contributed much to GDP in Q2” according to Senior UK Economist at Capital Economics Vicky Redwood.
This is alarming, she argued, as some of the special events mentioned by the ONS, such as the royal wedding and the sunny bank holidays, actually enhanced retail trading over the period, in particular in the fashion and grocery sectors.
With consumer spending and confidence both very low, summer sales and large promotions have been used by traders to boost business but these short-term measures may point to a difficult second half of the year for many shops.
Redwood commented: “The earlier than usual start to the summer sales suggests that retailers only managed to sustain demand by resorting to price discounting.
“With the squeeze on real pay set to get worse, we still think that sales volumes will be falling before long.”