It’s Official The UK Is Back In Recession

29 Mar

We have now had two consecutive quarters of economic contraction – the UK economy is therefore officially back in recession. This is according to The Organisation for Economic Co-operation and Development (OECD) but official figures for GDP in the current quarter will not be available until 25 April.

Chancellor George Osborne, the government and many economists have announced their hope that the UK will avoid a double-dip recession. The OECD’s outlook is gloomier.

 

The UK Economy

Britain’s recovery has left us in what could be the longest economic slump for possibly 100 years (excluding World Wars). The drop in the markets towards the end of 2011, has meant that this recessionary cycle has lasted three years and nine months since the recession started.

There are a number of more positive surveys, which support the argument of a return to weak growth this quarter. Some more recent indications suggest the UK’s economy will have expanded in the first quarter. The economy has generally been alternating between growth and contraction in successive quarters since the middle of 2010. Bank of England governor Sir Mervyn King this week said the economy will shrink again in the second quarter of 2012 due to the extra bank holiday for the Diamond Jubilee before bouncing back. ‘This zig-zag pattern is likely to continue for another couple of quarters, if not longer.

A positive from the change in consumer behaviour is the increase in savings. This has raised hopes that households will end up being in better financial shape. The Office of National Statistics showed figures detailing the savings ratio of 7.7% in the fourth quarter. This is significantly above approx. 3% as seen before the financial crisis.

 

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