The third estimate of gross domestic product for Q1 2009 shows a revised quarter on quarter contraction of 2.4% from 1.9% in Q1 and Q2.
The Centre for Economic and Business Research (CEBR) says the downwardly revised figure to 2.4% released this morning by the Office for National Statistics was “far worse” than the consensus expectation of a 2.1% fall in the first three months of the year compared to the previous three months.
The quarterly contraction matched the 2.4% contraction seen in the third quarter on 1979, which itself was the steepest drop in output since the 2.6% drop in the second quarter of 1958.
Construction slump
CEBR economist Benjamin Williamson said: “The downwards revision was made even worse due to a revision in construction sector data earlier this month. Output in the beleaguered sector was shown to have shrunk by 6.9% in the quarter compared to a 2.4% contraction previously estimated.”
The independent Office for National Statistics had previously suggested that this revision could translate to a reduction of 0.3 percentage points in gross domestic product.
“Looking across the other sectors, services output was shown to have fallen by 1.6%, revised down from an estimated contraction of 1.2%. Manufacturing sector output was confirmed to have decreased by 5.5% in the first three months of the year compared to the previous three months,” said Williamson.
Today’s figures show that the level of GDP is now 4.9% lower than the first quarter of 2008.
“While it is likely that the worst of the recession is now behind us, our latest forecast was for gross domestic product in 2009 to be at least 4.2 lower than in 2008. Our next forecasts will be released in the coming week. Today’s news fits with our view that steep cuts in investment and inventories drove the steep drop in gross domestic product in the final quarter of 2008 and first quarter of 2009,” said Williamson.
He added that with a variety of indicators showing improvement in the second quarter, “the rate of contraction in the second quarter is likely to be far shallower [and] our next set of forecasts for the United Kingdom economy are unlikely to be significantly revised."