Thursday, April 23, 2009

Economic slump continuing

Data 'to show slump continuing'

job centre
Unemployment has risen sharply in recent months

The UK economy shrank in the first three months of 2009 at about the same pace as it did in the final quarter of 2008, figures are expected to show.

Analysts forecast that gross domestic product (GDP) will have slipped by 1.5% from January to March, having dropped 1.6% between October and December 2008.

The government has already warned that the economy would shrink this year at its fastest pace since World War Two.

It follows Wednesday's announcement that 2.1m people are now out of work.

What began as problems in the financial sector has spread far more widely.

The housing market remains severely depressed and retail sales are weak.

We are still talking about contracting GDP and rising unemployment for the rest of the year
Simon Hayes
Economist, Barclays Capital

'On-going problems'

In January the UK economy met the widely accepted definition of a recession - two consecutive quarters of negative economic growth.

The chief UK economist at Barclays Capital, Simon Hayes, said that rising unemployment and concern over finances meant that consumers and businesses will have continued to cut back on spending at a similar rate early this year as at the end of last year.

"The sharpest falls in GDP may have already happened - but we are still talking about contracting GDP and rising unemployment for the rest of the year," he said.

Alistair Darling told the House of Commons on Wednesday the government would be forced to borrow £175bn this year as the recession battered the UK economy.

In his budget he said that the UK would return to growth by the end of 2009. However, many analysts say that this was wildly over-optimistic.

Free Domains