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Economy heading for recession, figures show

CFOWorld.co.uk staff | Jan. 26, 2012
The UK economy edged closer to recession in the final quarter of 2011, official figures have suggested.

The UK economy edged closer to recession in the final quarter of 2011, official figures have suggested.

The Office for National Statistics released figures that showed that GDP fell 0.2 percent in the fourth quarter, following growth of 0.6 percent in the previous three months. This was worse that economists' forecasts of a 0.1 percent contraction. This was the first time output contracted in 2011.

This is likely to heighten expectations that the Bank of England will inject more stimulus into the economy. This comes one day after official figures revealed that total debt tops £1 trillion for the first time.

For 2011 as a whole, GDP expanded by 0.9 percent, less than half the pace recorded in 2010.

On the year, fourth-quarter output was 0.8 percent higher, flattered by a sharp fall in output in the year-ago quarter due to heavy snow.

The fourth-quarter contraction in output follows a 0.25 percent decline in German GDP, and if UK output falls in the first three months of 2012, Britain will enter its second recession in three years.

The figures increase the chance that the Bank of England will approve a further £50 billion of quantitative easing in February, once the current £75 billion of purchases started in October are complete.

Bank Governor Mervyn King said on Tuesday that the central bank had scope to give the economy another cash boost if needed as inflation is falling and Britain faces an "arduous, long and uneven" economic recovery.

 

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