Figures released this morning indicate the UK could be heading for another recession. We answer five questions on the latest economy figures.
How much has the economy shrank by?
Figures released this morning by the Office of National Statistics show that the economy, or Gross Domestic Product, has shrank by 0.3 per cent in the last three months of 2012.
In the three months prior to this, the economy grew by 0.9% which is believed to have been boosted by the Olympic games.
This is the first estimate of how the economy performed in the fourth quarter, and is subject to at least two further revisions as further data is collected.
What is being cited as the cause of this latest shrinkage?
The ONS are blaming maintenance delays at the UK’s largest oil and gas field in the North Sea, which resulted in a fall of output from the extractive industries. Mining and quarrying output fell by 10.2 per cent, which knocked 0.18 per cent off of GDP.
Another industry that faired badly in the last quarter is manufacturing which fell by 1.5 per cent.
What does this mean for the outlook of the economy?
This means that the country could be heading for a third consecutive recession. Factors such as heavy snow could also hasten the economy into yet another recession.
How do the figures compare to what was expected?
The figures are said to be worse than expected. Sir Mervyn King, the Bank of England Governnor, has said he only expects a gentle recovery this year, although now even this is looking increasing unlikely.
The International Monetary Fund did cut its 2013 forecast for British economic growth to 1pc from 1.1pc predicted in October, indicating slow growth in the UK economy was anticipated.
What reaction have economists had to these recent figures?
Jonathan Portes, an economist from the National Institute of Economic and Social Research, speaking to the BBC said:
“Underlying it, ignoring all the special factors, what we see is the economy is not delivering the sustainable growth that we would normally see at this point in the cycle.”
He added: “This is due to the [UK] government’s policies and the failure of governments in the eurozone.
“They should not have cut the deficit so quickly and before the recovery was sustained.”
Meanwhile the Treasury said in a statement:
“It confirms what we already knew – that Britain, like many European countries, still faces a very difficult economic situation.
“While the economy is healing, it is a difficult road.”