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24/10/2008
First Step To Recession, As Economy Shrinks
UK Gross Domestic Product for the three months leading to September contracted by 0.5%, the Office for National Statistic announced today.
The fall is much greater than the 0.2% previously predicted by analysts, and gives the clearest indication yet that the domestic economy is on the brink of recession.
Third quarter shrinkage for 2008 is the biggest drop in GDP since the forth quarter of 1990, and the first contraction since the second quarter of 1992.
So far this year GDP has grown by 0.3%, the smallest rate of increase in 16 years.
Experts have suggested the continued downturn is certain to result in another interest rate cut next month.
Just weeks ago the Bank of England slashed rates by 0.5%, bringing the average rate to 4.5%, in a bid to shore up the economy.
Bank policymaker Andrew Sentence today warned of the greater risk posed by a more prolonged and painful recession.
He said: "We've had some quite deep and severe recessions in the UK before, and hopefully we can avoid that sort of situation in the current circumstances, but the risks of that have increased."
The only sectors of the economy not to report a fall during the quarter were agriculture, which represents 1% of GDP, and the government, which makes up around 23% of GDP.
Every other sector of the economy reported a decline.
Today's news will be a blow for Prime Minister Gordon Brown, who can no longer boast the Labour Party has presided over a continually growing economy since coming to power in 1997.
However, it is unlikely to be an unexpected turn of events.
On Wednesday, Mr Brown told the Commons the UK economy was in danger of falling into recession.
Bank of England Governor Mervyn King has already hinted that a recession is likely.
A recession is defined as two consecutive quarters of negative growth, therefore, any suggestion that the UK economy is currently in the midst of a recession is merely speculation.
We will not know the true extent until GDP for October to December is calculated at the end of the year.
(PR/JM)
The fall is much greater than the 0.2% previously predicted by analysts, and gives the clearest indication yet that the domestic economy is on the brink of recession.
Third quarter shrinkage for 2008 is the biggest drop in GDP since the forth quarter of 1990, and the first contraction since the second quarter of 1992.
So far this year GDP has grown by 0.3%, the smallest rate of increase in 16 years.
Experts have suggested the continued downturn is certain to result in another interest rate cut next month.
Just weeks ago the Bank of England slashed rates by 0.5%, bringing the average rate to 4.5%, in a bid to shore up the economy.
Bank policymaker Andrew Sentence today warned of the greater risk posed by a more prolonged and painful recession.
He said: "We've had some quite deep and severe recessions in the UK before, and hopefully we can avoid that sort of situation in the current circumstances, but the risks of that have increased."
The only sectors of the economy not to report a fall during the quarter were agriculture, which represents 1% of GDP, and the government, which makes up around 23% of GDP.
Every other sector of the economy reported a decline.
Today's news will be a blow for Prime Minister Gordon Brown, who can no longer boast the Labour Party has presided over a continually growing economy since coming to power in 1997.
However, it is unlikely to be an unexpected turn of events.
On Wednesday, Mr Brown told the Commons the UK economy was in danger of falling into recession.
Bank of England Governor Mervyn King has already hinted that a recession is likely.
A recession is defined as two consecutive quarters of negative growth, therefore, any suggestion that the UK economy is currently in the midst of a recession is merely speculation.
We will not know the true extent until GDP for October to December is calculated at the end of the year.
(PR/JM)
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Northern Ireland WeatherToday:After a dry start this morning rain will spread from the northwest across all parts. This afternoon will be dull with some patchy rain and drizzle. Becoming much milder through the afternoon. Maximum temperature 11 °C.Tonight:A cloudy evening and night with a little light rain or drizzle, perhaps some clear periods developing along the east coast. A very mild night everywhere. Minimum temperature 10 °C.
