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News - 30 May 2012

Revised Figures on UK Economy

Over the last year and a half, the economy has fluctuated between quarters of growth and contraction. In the first three months of the year, the UK economy shrank by 0.3%, this follows on from the last three months of last year when the economy shrank by the same amount.

The revised figures for the first quarter showed that output in the construction industry fell by 4.8% compared with the initial estimate of 3%.

An increase in government spending of 1.6% - the biggest rise since the first quarter of 2008 - went some way to offsetting this contraction. This was driven largely by spending on health and defence. The figures also showed unchanged growth in the service sector of 0.1%, while household spending increased by the same amount.

Following the revised figures, shadow chancellor Ed Balls described Prime Minister David Cameron and Chancellor George Osborne as "complacent and out of touch".

However, a number of commentators expressed surprise at the data, and some still argue that the latest figure does not accurately reflect the performance of the UK economy.

The head of the International Monetary Fund, Christine Lagarde, said that if the economic recovery continues to falter, the UK should consider more QE. She also suggested the Bank could cut interest rates below the current record low of 0.5%.

The Bank has already pumped £325bn into the UK economy through its QE programme to try to boost growth, but has said it is open to the idea of further cash injections.

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