The double-dip recession is even worse than feared as official figures today showed a sharper economic slump than predicted.
In a blow to George Osborne, gross domestic product (GDP) shrank by 0.4% between October and December last year, compared with a previous estimate of 0.3%.
The economy also contracted by 0.3% in the first quarter of this year, which is an unchanged prediction, the Office for National Statistics (ONS) said this morning.
The figures mean the current recession – defined as two or more quarters of declining growth in a row – is more severe than first thought.
The downward revision will heap more pressure on the Government and fuel criticism that the Chancellor’s austerity measures are choking off the recovery.
TUC general secretary Brendan Barber said: ‘Today’s figures lay bare the damage caused by the Government’s austerity programme.
‘The Chancellor has steered the UK back into a double-dip recession for the first time in 40 years, with falling living standards continuing to depress consumer spending.
‘This is not how you secure an economic recovery. Continuing with self-defeating austerity is not only choking off recovery but also risks causing permanent long-term damage to the UK economy.
‘A new plan based on investment and jobs is more vital now than ever.’
Vicky Redwood, chief UK economist at Capital Economics, said the economy is likely to remain in recession in the second quarter, shrinking 0.5% across the whole of 2012.
She said: ‘Given the negative impact of June’s extra bank holiday, GDP is likely to have contracted again in the second quarter.
‘Indeed, there are still numerous factors likely to constrain the recovery going forward, not least tight credit conditions.’
The impact of the weak economy was underlined by household spending figures, which showed expenditure falling by 0.1% compared with a previous estimate of 0.1% growth.
And in a further sign that the Chancellor’s deficit-busting plans are struggling, Government spending grew at its fastest rate in nearly seven years between January and March, the ONS said.
The 1.9% surge in Government expenditure was driven by higher spending on public administration, health and defence.
Meanwhile, the decline in household expenditure in the first quarter was driven by a fall in spending on financial services and social protection.
The decreases were partially offset by spending on food and drink and recreation and culture.
The construction sector declined by a larger than previously estimated 4.9%, its worst performance since the first quarter of 2009.
Industrial production sector output, which includes manufacturing, was also revised downwards to a fall of 0.5% from a 0.4% decline.
Despite the overall decline in GDP, growth in the powerhouse service sector, which makes up 75% of the economy, was revised upwards from 0.1% to 0.2% in the first quarter.
Economists and business leaders have warned that a technical recession will hit confidence and could cause businesses to rein in spending at a time when they are being encouraged to invest to stimulate growth.
But the current downturn is expected to be nothing like as severe as the previous recession of 2008/09, which spanned more than a year
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