A SENIOR economic advisor at Ernst & Young’s ITEM Club has reacted with disbelief to figures that show the UK economy has returned to recession.
According to figures from the Office for National Statistics released today, the economy shrunk by 0.2% in the first three months of the year, coming on the back of the 0.3% decline at the end of last year
A 3% decline in the construction sector was behind the contraction, the ONS said.
“The initial reaction to these figures must be one of disbelief,” said Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club.
“The divergence between the stronger survey data and dire official output estimates is virtually unprecedented and must raise significant question marks over the quality of the data. The construction figures are an obvious source of bewilderment, but the services data also looks highly questionable given what we already knew about the early part of the quarter. Certainly the impression that we have from talking to businesses is the UK economy is not in recession.”
Goodwin added that he would be “very surprised” if the figures were not revised upwards substantially over the coming months.
KPMG’s chief economist, Andrew Smith, said output is expected to remain weak in the second quarter and with extra holidays, the Jubilee and the Olympic Games distorting the picture over the summer.
“It will be some time before the underlying picture is clear. But even if activity recovers in the second half, overall this looks like being – at best – another year of weak growth, held back by squeezed real incomes and public spending cuts. Recovery postponed (again),” Smith said.
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