The UK economy has experienced a sharper than expected slowdown, as the latest GDP figures for the second quarter of 2012 show a contraction of 0.7%.
This follows a 0.3% fall in economic output in the first quarter and means that negative GDP is now very likely for 2012 as a whole.
According to the Office for National Statistics, the fall was largely the result of a sharp slowdown in the construction sector.
Output in construction fell by 5.2% in the second quarter as government spending cuts on social housing and infrastructure projects hurt the sector.
Elsewhere in the economy, production output including manufacturing fell by 1.3% in the second quarter. The services sector shrunk by 0.1%.
The additional Bank Holiday in June and the bad weather earlier this summer may have also contributed to the fall in GDP, although the Office for National Statistics has not been able to quantify this yet.
This is a first estimate of second quarter GDP; the figures could be revised upwards or downwards in the next couple of months.
The preliminary figures have been described as a “disaster” for UK growth.
It is worth noting that economic growth and investment returns are not always correlated. Following the announcement of these figures this morning, the FTSE 100 index of leading UK company shares is up by around 0.2% as I type this.
Photo credit: Flickr/unruly chaffinch
