Monday, October 10, 2011

Recession was deeper and recovery slower than expected

Britain suffered a deeper recession than previously thought and is recovering even more slowly than had been believed, official figures show.

The revelation came as the Office for National Statistics (ONS) unexpectedly downgraded its estimate of economic growth for the three months to June from 0.2pc to 0.1pc as part of a major recalculation of historical data. At the same time, it revised down its estimate for the three months to March from 0.5pc to 0.4pc.

Given the 0.5pc contraction in the final three months of 2010, the new figures revealed that the economy has flatlined for the past nine months. An examination of the detailed revisions showed that, technically, the economy is still marginally smaller than it was at the end of September last year.

Ed Balls, the shadow Chancellor, said: "These deeply concerning figures show the British economy has stagnated since the autumn of last year, well before the eurozone crisis... They show things are even worse than we thought."

As part of the biggest revision to the classification and calculation of British GDP data in at least 15 years, the ONS said that it now believed Britain’s economy shrank by 7.1pc between March 2008 and its end in June 2009, making the recession deeper than the previous estimate of 6.4pc but three months shorter than thought.

The changes also revealed that the country has more catching up to do to regain its pre-recession level of output. The economy is currently 4.4pc smaller than its peak in March 2008. Before the latest revisions, the shortfall was estimated to be just 3.9pc. more