Britain Stuck in Recession

Dec. 22, 2009
The U.K. economy is predicted to shrink 4.75% this year.

Britain remains the last major economy in recession, according to official data released on Tuesday, although signs of recovery emerged as the country's output shrank less than previously forecast.

The Office for National Statistics (ONS) said that British gross domestic product contracted by 0.2% during the July-September period compared with the previous three-month period.

Although the data was better than a previous ONS estimate of minus 0.3%, analysts' consensus forecast had been for a revision to minus 0.1%.

Britain officially ends 2009 as the only top economy in recession, after the eurozone, France, Germany, Japan and the United States all have emerged from a deep downturn that was sparked by the global financial crisis.

"Gross domestic product contracted by 0.2% in the third quarter of 2009," the ONS said. "This has been revised from a fall of 0.3% in the previous estimate of GDP, due to upward revisions to construction partly offset by downward revisions to production and services.

"GDP remains 5.1% lower than the third quarter of 2008."

British Prime Minister Gordon Brown's government, heading for defeat in next year's general election according to polls, believes that the country has returned to growth during the current fourth quarter. However, markets must wait for the release of official data in late January for confirmation.

"A reasonably strong return to growth in the fourth quarter of 2009 seems all but certain, as retailers benefit from what is looking like a strong Christmas," said Ben Read, an economist at the Centre for Economics and Business Research, an independent consultancy.

Economy Has Contracted for Six Quarters in a Row

Britain's economy, which is struggling with high unemployment and massive public debt caused by the financial crisis, has contracted for six quarters in a row -- its longest recession since records began in 1955.

British Finance Minister Alistair Darling recently admitted that Britain's recession would be deeper than thought -- with the economy predicted to shrink 4.75% this year compared with a prior official estimate of 3.5%.

The economy is expected to grow by 1% to 1.5% next year, Darling added, matching his previous forecast.

"Whilst we fully support the view that growth will soon reappear in the U.K. economy albeit at a very low level, we continue to caution on expectations that growth ... will continue throughout 2010," BGC Partners senior strategist Howard Wheeldon said following the release of Tuesday's data. "Whilst the rate of job losses in the U.K. has clearly slowed, we have as yet been unable to find sufficient evidence of new investment intention within the corporate sectors that might lead to a period of new job creation and thus a period of renewed and sustainable growth."

Meanwhile, there was better news for another European nation on Tuesday, as Denmark announced it had emerged from recession in the third quarter thanks to its economy growing by 0.6% compared with the preceding three months.

Copyright Agence France-Presse, 2009

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