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GDP fall not as marked as thought

GDP fall not as marked as thought

Category: Economy

Updated: 28/08/2009
First Published: 28/08/2009

MONEYFACTS ARCHIVE
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The fall in UK Gross Domestic Product (GDP) in the second quarter of the year was not as marked as previously thought, the Office for National Statistics (ONS) has said.

It had been reported that GDP fell by 0.8 per cent in the second quarter of the year. However, the economy actually contracted on a slightly smaller scale, with output falling by 0.7 per cent.

The news has come as a surprise to many, with economists widely predicting that the original estimate would remain unchanged, while other expected a downward revision following disappointing figures for business investments.

The slight revision is a result of improved output from the manufacturing, energy, wholesaling and motor vehicle sectors, and will increase hopes that the UK will record an increase in GDP in the third quarter of the year.

While the economy still contracted, the figure is a clear improvement on the first three months of the year, when output fell by some 2.4 per cent. However, the UK still has some way to go to catch its European cousins France and Germany, with both recording growth in GDP in the second quarter, meaning they officially exited recession.

The year-on-year rate of decline has been revised down by 0.1 percentage points to 5.5 per cent, although this still represents the largest fall since records began way back in 1955.

David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: "After this week's poor business investment figures, the GDP revision comes as a slight relief.

"Fears that GDP would be revised downward have proved too pessimistic. However, the small improvement cannot obscure the severity of the UK recession and the challenges facing us."

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