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UK economic growth at standstill UK economy comes to a standstill
(about 2 hours later)
UK economic growth ground to a halt between April and June, according to the latest official data. UK economic growth ground to a halt between April and June, according to the latest official figures.
The Office for National Statistics said economic growth was unchanged in the second quarter from the first, revising an earlier estimate of 0.2% growth. The Office for National Statistics said the economy stalled, showing no growth from the first quarter of 2008.
It ends a run of 63 consecutive quarters of growth in the UK and is the weakest data since 1992. It ends a run of more than 15 years of consecutive growth in the UK and will raise expectations of a rate cut.
The figures are likely to raise expectations of a cut in interest rates to prevent a protracted slowdown. The 0% growth figure was down from an earlier estimate of 0.2% and lower than the 0.3% growth recorded in the first three months of 2008.
The services sector, the backbone of the UK economy, grew just 0.2%, while manufacturing output fell by 0.8%. Household spending dropped by 0.1%. The figures were the weakest since 1992 and the news sent the pound lower against the dollar and the euro.
The figures are very weak and suggest the UK economy is already in recession George Buckley, Deutsche Bank The symbolism of stagnationQ&A: What is a recession?How families are coping with the economic squeezeIn quotes: growth stallsThe figures are very weak and suggest the UK economy is already in recession George Buckley, Deutsche Bank The symbolism of stagnationQ&A: What is a recession?How families are coping with the economic squeezeIn quotes: growth stalls
The services sector, the backbone of the UK economy, grew just 0.2%, while manufacturing output fell by 0.8%. Household spending dropped by 0.1%.
Exports also fell as Europe, the UK's main trading partner, saw growth contract in the same period.Exports also fell as Europe, the UK's main trading partner, saw growth contract in the same period.
The economy grew 1.4% from the second quarter of 2007 revised down from an initial estimate of 1.6%. The UK economy grew 1.4% from the second quarter of 2007, revised down from an initial estimate of 1.6%.
"The figures are very weak and suggest the UK economy is already in recession," said George Buckley, an economist at Deutsche Bank."The figures are very weak and suggest the UK economy is already in recession," said George Buckley, an economist at Deutsche Bank.
The economy technically enters a recession when it shrinks for two consecutive quarters.The economy technically enters a recession when it shrinks for two consecutive quarters.
Rate dilemmaRate dilemma
Bank of England governor Mervyn King has warned that the UK economy is in for a difficult and painful period due to a combination of high inflation and rapidly slowing growth.Bank of England governor Mervyn King has warned that the UK economy is in for a difficult and painful period due to a combination of high inflation and rapidly slowing growth.
Inflation, which hit 4.4% in July, could make it more difficult for the Bank to cut interest rates to spur the economy but analysts said the zero growth reading could lead to lower borrowing costs by the end of this year. Inflation, which hit 4.4% in July - well above the 2% target rate, could make it more difficult for the Bank to cut interest rates to spur the economy, but analysts said the zero growth reading could lead to lower borrowing costs by the end of this year.
"This really does put a rate cut firmly on the agenda although it is unlikely to come until we have seen the peak in inflation," said Brian Hilliard, an analyst at SG."This really does put a rate cut firmly on the agenda although it is unlikely to come until we have seen the peak in inflation," said Brian Hilliard, an analyst at SG.