LONDON (Thomson Financial) - The British economy grew at its slowest rate in
over three years during the second quarter of the year as housing construction
came to a near standstill, official figures showed today.
The office for National Statistics said GDP rose by an expected 0.2 percent
in the three months to end-June from the previous three month period, down on
the 0.3 percent recorded in the first three months of the year.
The second quarter rate of growth is the lowest since the first quarter of
2005, when output rose by 0.2 percent also.
It was last lower in the second quarter of 2001, when growth was 0.1
percent. The last time the UK economy saw output decline was in the second
quarter of 1992.
On an annual basis, the statistics office said the UK economy grew by 1.6
percent. That was the lowest since the second quarter of 2005, when it also grew
by 1.6 percent. It was last lower in the first quarter of 1993, when growth
stood at 1.5 percent.
The statistics office said the main reason behind the growth deceleration
during the quarter came from the construction sector, primarily to a
particularly large fall in new housing construction, partly offset by public
infrastructure spending.
The travails afflicting housing have been clearly illustrated by the
problems affecting UK housebuilders on the stock market, such as Persimmon and
Barratt Developments.
Construction output, which accounts for around 6 percent of the UK economy,
saw output decline by 0.7 percent on a quarterly basis, its biggest decline
since the third quarter of 2005. On an annual basis, construction output was
only 0.8 percent higher, down on the 2.4 percent growth seen the first quarter.
The annual rate was the worst performance since the second quarter of 2006, when
output declined by 0.3 percent.
Elsewhere, the statistics office said the services sector, which accounts
for around two-thirds of total output, saw output rise 0.4 percent on a
quarterly basis. Though 0.1 percentage point higher than the previous quarter,
the annual rate of growth was only 2.1 percent, its lowest level since the
fourth quarter of 1992, and down on the first quarter's equivalent 2.6 percent.
Within services, business services and finance saw output grow by 0.1
percent, half the first quarter rate. The second quarter rate was the lowest
since the first quarter of 2002 and provides further evidence that the credit
crunch is hitting home, particularly in the City of London.
Meanwhile, industrial output, which accounts for around 19 percent of UK
GDP, was down a quarterly 0.5 percent, even worse than the 0.2 percent decline
recorded in the first quarter. The decline was the biggest since the fourth
quarter of 2005 when it fell by 0.7 percent.
As a result of the second consecutive quarterly decline, the annual rate
fell by 0.8 percent, following a 0.4 percent rise in the first quarter. The
annual fall was the biggest since the the fourth quarter of 2005, when it
declined 2.7 percent.
Within industrial output, its main constituent, the manufacturing sector saw
output decline 0.4 percent, offsetting the equivalent rise in the first quarter.
On an annual basis, it was also down 0.4 percent after a 0.9 percent rise in the
previous quarter. The annual decline was the biggest since the fourth quarter of
2005, when output declined by 2.2 percent.
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