Revised figures of the state of the UK economy have been released today, revealing that the recession is not as severe as first feared.
Initial estimates of the state of the British economy, which claimed that GDP had fallen 0.7 per cent over the second quarter, have been revised by the Office for National Statistics (ONS), which now states that GDP decreased 0.5 per cent over the period.
Consumer spending and household final expenditure were both revised and fell by 0.4 per cent, while the 0.1 per cent decrease in services output was left unrevised.
In spite of this revision, the economy nonetheless contracted over the period to represent its greatest quarter-on-quarter drop in over three years and Vicky Redwood, Chief UK Economist at Capital Economics, warned that it is important to put the latest figures into perspective.
“The extra bank holiday in June probably accounted for all of the fall in GDP,” Redwood explained.
“But even without that, underlying output did no better than stagnate. GDP is still 1.1 per cent below its level at the start of the recent dip and 4.3 per cent below its peak in 2008.
“What’s more, it is worth remembering that the preliminary estimate of GDP was much worse than expected.
“So even now, GDP is still estimated to have fallen by more than the 0.2 per cent drop that the consensus expected ahead of the initial estimate.”
Last week, the ONS upwardly revised its retail sales figures for June, correcting its initial 0.1 per cent estimate to 0.8 per cent, an alteration that strongly affected GDP results.
Redwood also cautioned that GDP figures may be revised further considering the positive employment statistics revealed recently, though pointed out these current revisions are in line with reported weakness in tax receipts.
“Either way, GDP should rebound in the third quarter as the bank holiday effect unwinds and any boost to the Olympics comes through,” she added.
“However, this will obviously just be a temporary pick-up. And worryingly, the fall in the CIPS surveys in July suggest that underlying activity in the third quarter got off to a poor start.
“Given the drags from the fiscal squeeze, euro-zone crisis and high domestic debt levels, we still doubt that a strong recovery lies ahead. Indeed, the economy could well return to contraction in the final quarter of the year.”