Britain's economy contracted less than thought during the second quarter, offering a higher base for an expected return to tepid growth and lifting the pound while supporting share prices. Other data showed Britain's financial position worsened, although economists said the biggest current account deficit on record was partly because of lower returns on investments in the crisis-hit euro zone.
The Office for National Statistics said on Thursday gross domestic product (GDP) fell 0.4 percent in the three months from April to June compared with the first quarter. The ONS had previously estimated the fall at 0.5 percent and economists had expected that rate to be unrevised. Year-on-year, GDP was 0.5 percent down, in line with forecasts and the previous ONS estimate.
The economy has not fully recovered output lost during the financial crisis. It slipped back into recession, according to ONS data, in the final quarter of 2011 as the euro zone debt crisis and British government austerity weighed on output. The latest data brought GDP more in line with less downbeat business surveys, economists said. Stripping out the hit from the extra public holiday to celebrate Queen Elizabeth's 60 years on the throne, the economy may have even eked out some growth.
A meaningful recovery remains elusive despite a string of government measures to unblock lending to businesses and consumers, with a Reuters poll finding a consensus forecast for 1.2 percent GDP growth next year after a drop in 2012. A 3.0 percent fall in construction output remained the main drag on the economy in the second quarter. Household spending fell 0.2 percent, but real disposable income rose 1.9 percent, the sharpest increase in three years.
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