UK Economy Fails To Exit Recession

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The UK economy contracted 0.4% sequentially in the third quarter, after shrinking 0.6% in the second quarter, the Office for National Statistics said Friday. Economists were expecting the economy to exit recession in the third quarter by expanding 0.2%.

The decline in the third quarter was the fifth consecutive quarter of steep contraction, following a small fall in the second quarter of 2008, the ONS said. The sequential decline in output was due to decreases in all component aggregate series. Output of the service industries slipped 0.2% and output in the production industries dropped 0.7%.

Year-on-year, gross domestic product was down 5.2% in the third quarter, larger than the expected fall of 4.6%.

Commenting on the latest GDP data, ING economist James Knightley said, "This is a major surprise largely from the fact that the purchasing managers' indices have historically been excellent lead indicators for GDP and had been pointing to robust growth." The economist noted no revised data will be released ahead of the next Bank of England rate-setting session. "This clearly suggests that the likelihood of an expansion in QE by GBP 50 billion or so over the next quarter is rising, although is not a forgone conclusion."

The UK economy contracted 0.4% sequentially in the third quarter, after shrinking 0.6% in the second quarter, the Office for National Statistics said Friday. (Market News Provided by RTTNews)