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| Sharp contraction for UK economy | Sharp contraction for UK economy |
| (40 minutes later) | |
| The UK economy contracted 2.4% in the first quarter of 2009, its biggest quarterly decline in 51 years, according to the latest official data. | The UK economy contracted 2.4% in the first quarter of 2009, its biggest quarterly decline in 51 years, according to the latest official data. |
| The decline was more severe than the earlier estimate of a 1.9% fall, and worse than analyst expectations. | The decline was more severe than the earlier estimate of a 1.9% fall, and worse than analyst expectations. |
| The Office for National Statistics (ONS) blamed the sharp revision primarily on weaker output in the construction and manufacturing sectors. | The Office for National Statistics (ONS) blamed the sharp revision primarily on weaker output in the construction and manufacturing sectors. |
| It also said the recession started earlier than first thought last year. | It also said the recession started earlier than first thought last year. |
| The scale of revision comes as a real shock, and highlights the extreme weakness of the economy in the early months of the year Andrew Goodwin, Ernst & Young Item Club See the changes in UK GDP | |
| The ONS now says the recession began during the second quarter of 2008 rather than during July to September, so that the recession has now been running for a whole year. | The ONS now says the recession began during the second quarter of 2008 rather than during July to September, so that the recession has now been running for a whole year. |
| The ONS said economic output shrank 4.9% during the first quarter of 2009 compared with the first quarter of 2008, the biggest year-on-year fall on record. | The ONS said economic output shrank 4.9% during the first quarter of 2009 compared with the first quarter of 2008, the biggest year-on-year fall on record. |
| The figures will make it more difficult for the Treasury to reach its forecast of a 3.5% decline in the UK economy for the year, made in the April Budget. | The figures will make it more difficult for the Treasury to reach its forecast of a 3.5% decline in the UK economy for the year, made in the April Budget. |
| But the Chief Secretary to the Treasury, Liam Byrne, said it would not be revising its forecast. | But the Chief Secretary to the Treasury, Liam Byrne, said it would not be revising its forecast. |
| "There have been some tentative signs that the fall in output is moderating and I remain confident but cautious about the prospects for the economy," he added. | "There have been some tentative signs that the fall in output is moderating and I remain confident but cautious about the prospects for the economy," he added. |
| Lower incomes | Lower incomes |
| January to March's quarterly 2.4% decline was the sharpest contraction since the second quarter of 1958. Analysts had only expected a 2.1% fall. | January to March's quarterly 2.4% decline was the sharpest contraction since the second quarter of 1958. Analysts had only expected a 2.1% fall. |
| 1958 FACTS Singer Elvis Presley starts military service with US ArmyCampaign for Nuclear Disarmament founded in LondonFirst Cod War between UK and Iceland lasts three monthsUK's first stretch of motorway opens near Preston | 1958 FACTS Singer Elvis Presley starts military service with US ArmyCampaign for Nuclear Disarmament founded in LondonFirst Cod War between UK and Iceland lasts three monthsUK's first stretch of motorway opens near Preston |
| Construction output decreased between January and March by 6.9%, while the service sector contracted by 1.6% - led by the banking and financial industries, which saw output slip 2.5%. | Construction output decreased between January and March by 6.9%, while the service sector contracted by 1.6% - led by the banking and financial industries, which saw output slip 2.5%. |
| Quarterly manufacturing output fell by 5.5%. | Quarterly manufacturing output fell by 5.5%. |
| Meanwhile, real household disposable income fell by 2.4%, while the savings rate dropped from 4% to 3%. | Meanwhile, real household disposable income fell by 2.4%, while the savings rate dropped from 4% to 3%. |
| Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club, said the figures were much worse than expected. | |
| "We had expected a downward revision to GDP, given the plunge in construction output since the last quarter, but the scale of revision comes as a real shock, and highlights the extreme weakness of the economy in the early months of the year," he said. | "We had expected a downward revision to GDP, given the plunge in construction output since the last quarter, but the scale of revision comes as a real shock, and highlights the extreme weakness of the economy in the early months of the year," he said. |
| Fellow analyst, Ross Walker, economist at RBS Financial Markets, said the latest figures were "disappointing". | Fellow analyst, Ross Walker, economist at RBS Financial Markets, said the latest figures were "disappointing". |
| "We knew about the construction revisions in advance and the fall wasn't quite as big as the ONS had indicated," said Mr Walker. "But we've got a much bigger fall in services output." | "We knew about the construction revisions in advance and the fall wasn't quite as big as the ONS had indicated," said Mr Walker. "But we've got a much bigger fall in services output." |
| Getting better? | Getting better? |
| Despite the economy's big downward revision for the first quarter of 2009, the expectation is that the official figures for April to June will be nowhere near as bad when the first estimates are published at the end of July. | Despite the economy's big downward revision for the first quarter of 2009, the expectation is that the official figures for April to June will be nowhere near as bad when the first estimates are published at the end of July. |
| If you thought that any recovery was resting on shaky foundations, you will see plenty of support for that view in today's news Stephanie Flanders, BBC economics editor Read Stephanie's blog | |
| Earlier this month, the ONS said industrial production rose in April, its first month-on-month climb since February of last year. | Earlier this month, the ONS said industrial production rose in April, its first month-on-month climb since February of last year. |
| A growing number of reports from business organisations such as the CBI have also predicted that the worst of the recession is over. | A growing number of reports from business organisations such as the CBI have also predicted that the worst of the recession is over. |
| The CBI said earlier this month that the economy was now stabilising, and would begin a "slow and gradual" recovery from early next year. | The CBI said earlier this month that the economy was now stabilising, and would begin a "slow and gradual" recovery from early next year. |
| Separately, a key service sector survey reported a growth in business in May for the first time since April 2008. | Separately, a key service sector survey reported a growth in business in May for the first time since April 2008. |
| The PMI service index from the Chartered Institute of Purchasing and Supply rose to 51.7 in May, up from 48.7 in April, with a measure above 50 indicating growth. | The PMI service index from the Chartered Institute of Purchasing and Supply rose to 51.7 in May, up from 48.7 in April, with a measure above 50 indicating growth. |
| Martin Weale, director of the National Institute for Economic and Social Research, whose organisation estimates GDP on a monthly basis, recently told the BBC that he expected second quarter GDP to be flat. | Martin Weale, director of the National Institute for Economic and Social Research, whose organisation estimates GDP on a monthly basis, recently told the BBC that he expected second quarter GDP to be flat. |
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