Britannia Radio

One comment sums it up - - -"Third quarter GDP is awful, with no positive news within the report” .

Most seem to agree - except - er - Darling. 

Christina 

REUTERS     23.10.09

UK still in recession after shock Q3 contraction

LONDON (Reuters) - The economy contracted unexpectedly in the third quarter of this year, squashing hopes of an end to the downturn and instead making the current recession the longest on record, official data showed on Friday.

The Office for National Statistics said gross domestic product fell by 0.4 percent between July and September, meaning the economy has contracted for six successive quarters for the first time since records began in 1955.

This was much worse than analysts' expectations of a 0.2 percent rise. Not a single analyst out of the 35 polled by Reuters before the data had expected a negative reading.

"Third quarter GDP is awful, with no positive news within the report,"said James Knightley, economist at ING. "More worryingly from sterling's perspective is the fact that the UK may be the only major economy to have contracted in the third quarter.

With an election due by next June, the length of the downturn will be an embarrassment to Prime Minister Gordon Brown's Labour Party, particularly as Germany and France are already out of recession.

Markets reacted predictably to the data with sterling falling by more than a cent against the dollar and gilt futures surging as traders bet the Bank of England was likely to keep monetary policy loose for longer.

Year-on-year, output shrank by 5.2 percent, only marginally better than the record 5.5 percent annual fall registered in the second quarter. The quarterly decline between April and June was unrevised at 0.6 percent.

The government has forecast growth will resume by the end of the year and is counting on a stronger rebound in the coming years than most independent forecasters.

The ONS said there had been a peak-to-trough GDP fall of 5.9 percent during the current recession, compared to 6.0 percent between the second quarter of 1979 and the first quarter of 1981 -- a period when there were some quarters of growth.

Analysts had been pinning their hopes for recovery on months of survey evidence that had pointed to a sharp rise in confidence and activity in the services sector, which makes up three quarters of the economy.

"What is most striking is the still-weak contribution from the services sector," said Stephen Lewis, economist at Monument Securities.

Services contracted by 0.2 percent over the quarter, with the distribution, hotels and catering sub-sector leading the decline with a 1.0 percent quarterly drop.

Economists had already expected industrial output to be weak, following a sharp monthly drop in August, and the GDP data bore this out. Industrial production fell by 0.7 percent over the quarter, taking its annual decline to 10.4 percent.

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(Reporting by David Milliken and Christina Fincher; editing by Chris Pizzey)

POLITICS HOME  23.10.09

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BBC News

Cable: "Cold blast of realism" highlights "complete disconnect" in City

•Vince Cable MP, Liberal Democrats Treasury spokesman

Mr Cable slammed the "complete disconnect" in the City about the state of the economy, which he said justified "anger" from the general public.

He said that GDP figures show the economy shrinking by 0.4% as a "cold blast of realism" and said that the problem was not how much the economy shrank by, but how to get the economy back on track.

"We've had quite a lot of talk recently based on a booming stock exchange, on the prices of luxury houses in London", he said, adding that GDP figures provide a "cold blast of realism".

He said that "there is very deep hardship in some parts of the country" and that "the issue now is not how badly the economy performs, but the difficulties we have getting out of it."

He highlighted bank performance as a particular difficulty, and said that "because the government owns half the banking system, in my view, it should be more active in getting lending out".

BBC News/Sky News

GDP figures show Brown's recession plan hasn't worked, says Osborne

•George Osborne MP, Shadow Chancellor of the Exchequer

The shrinkage in GDP in the third quarter is “deeply, deeply disappointing” and shows that the government's recession plan has not worked, according to George Osborne.

The shadow chancellor said the figures are “deeply deeply disappointing. I think many people in the country will be extremely concerned now.

“It is clear that Gordon Brown’s recession plan hasn’t worked.

“We need urgent new economic leadership in the country... that means a new team at the top.”

He added that the figures “destroy the myth” that Britain was well prepared to get out of recession.

BBC News/Sky News

Confidence in economy beginning to return, Darling insists

•Alistair Darling MP, Chancellor of the Exchequer

Mr Darling insisted that confidence was returning to the economy and that support for recovery needed to be maintained.

“I didn’t expect to see growth until around the turn of the year,” he said.

“What I’m very certain about is that confidence is beginning to return.

“I’ve always said it would take time to come through it - our job is to support the economy

“We’ve got to keep the support we put in place working. [“working” ?  Oh, so that’s what he calls it! -cs]