The economy is clearly a long way from recovery, according to the latest figures from the Office for National Statistics: GDP shrank by 1.9% in the first three months of 2009, even worse than analysts were expecting. Coupled with the 1.6% drop in the previous quarter, this adds up to the economy’s biggest six-month decline since the ONS records began. In other words, we’re still knee-deep in recession – which makes Alistair Darling's claim that the UK economy would suffer a ‘mere’ 3.5% contraction this year (a more positive outlook than pretty much every other forecaster, including the IMF) look even less likely than it did on Wednesday…
Manufacturing bore the brunt of the slump once again: the sector shrank by 6.2% last quarter, following its 4.2% slump in the previous three months – and it’s largely thanks to the decline of the car industry. Despite ongoing Government efforts to prop up the sector, the Society of Motor Manufacturers and Traders said there was a 51.3% slump in new car production in March compared to the same month last year. Admittedly that was marginally better than the 59% drop in February, but there’s no escaping the fact that the industry’s still in freefall.
Only two sectors saw any kind of growth: agriculture and – you guessed it – government output, both of which inched up 0.3%. Retail sales also saw a surprise bounce, rising 0.3%. But otherwise, the picture was pretty grim across the board - and it’s clearly feeding into the job market too, given the 177,000 jump in unemployment announced earlier this week.
Taken together, these gloomy figures cast even more doubt on Darling's predictions that the UK economy would contract by just 3.5% this year, before bouncing back to growth in 2010. Most independent experts now think we should be battening down the hatches for a decline of at least 4% in 2009 – although even this morning, the Treasury continues to insist that its sums are sensible. Whereas the likes of Germany admits that its economy will shrink by a whopping 6% this year, Darling and co are refusing to take off the rose-tinted glasses – probably because that would also mean admitting that their debt repayment plans are a load of bunkum.
About the only positive news is that economists seem to think this may be as bad as it gets. It’s pretty clear GDP will keep heading south for the next few months, but hopefully the pace of the decline will slow as the Government and Bank of England’s various measures to stimulate the economy start kicking in. But you’d need pretty good eyes to see any green shoots in these figures...
In today's bulletin:
UK economy suffers biggest slump since records began
Microsoft sales fail to compute
Scaling your business with Susan Boyle
Editor's blog: Can the new connectedness save us?
Tightening the purse strings, with YouTube