Unconstructive zone

25 April 2012 By Ian Campbell

The latest report shows British GDP has fallen for the second quarter in a row. With Europe in recession and Britain in austerity, such weakness is no surprise. But the government and the central bank should still worry more about inflation than economic decline.

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The national statistics office reported that the UK’s gross domestic product fell by 0.2 percent in the first quarter of 2012. The UK is therefore back in recession - understood as two consecutive quarters of contraction - after GDP fell by 0.3 percent in the fourth quarter of 2011.
The statistics office said that output of production industries decreased by 0.4 percent in the first quarter, following a decrease of 1.3 percent in the previous quarter. Output by service industries rose by 0.1 percent, reversing a contraction of 0.1 percent in the previous quarter. Construction sector output decreased by a very large 3 percent quarter-on-quarter and subtracted 0.2 percentage points of growth from overall GDP.
The pound fell following the release. It retreated from a 7-month high against the dollar of $1.614 to below $1.61 and dropped back from 20-month highs against the euro so that the European currency rose to around 82.2 pence from 81.9 pence prior to the release.

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