Economy shrank by less than first thought

Sarah Davidson

August 24, 2012

Output of the production industries fell by 0.9% within which manufacturing output also fell by 0.9%.

Output of the services industries fell by 0.1% while output of the construction industry fell by 3.9%.

Household final consumption expenditure decreased by 0.4% in volume terms in the latest quarter and in current price terms, compensation of employees rose by 1.8% in the second quarter of 2012.

Rachel Reeves MP, Labour’s Shadow Chief Secretary to the Treasury, said any small upward revision in growth figures is welcome, but the economy is still in the longest double-dip recession since the Second World War.

She said: “That’s why borrowing so far this year has risen by a quarter compared to last year.

“David Cameron and George Osborne’s plan has badly failed. Since the spending review our economy has shrunk by 0.6%. And with Britain just one of two G20 countries in a double-dip it is clear that this is a recession made in Downing Street.

“Thank goodness the Olympics will have a positive effect on the next quarter’s growth figures, but this short term boost is not the long-term strategy we need. We urgently need a change of course and a plan for jobs and growth to stop permanent damage being done, as the IMF has warned. The longer this complacent Chancellor clings on to his failed plan, the heavier the price our country will pay.”

Natasha-Rachel Smith, consumer affairs expert of TopCashBack, said: “A revision upwards of the GDP figure may indicate that the recession is not quite as deep as at first feared.

“This may in turn contribute to a rise in confidence amongst both businesses and consumers and could help loosen consumer-purse strings over the bank holiday weekend and into the late summer period, benefitting the economy as a whole.

“However the days of heedless spending are definitely over.”

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