Economy contracts 1.5% in first quarter

Recession bears hallmarks of 1979

Britain’s economy is thought to have contracted by a further 1.5% in the first quarter of the year, prompting many economists to compare this recession with that of 1979.

One of the most respected trends forecasters, the National Institute of Economic and Social Research (NIESR) estimated that our economy contracted 1.5% between January and March.  If accurate, our situation has remained unchanged since the last quarter of 2008, when GDP dropped 1.6%.

The Office of National Statistics (ONS) are expected to publish data on the 24th April that will confirm the pessimistic view that the economy has not improved.

The state of our gross domestic product bears striking similarities with the recession Margaret Thatcher faced in 1979. NIESR stated: “If the 1980s profile were followed, output would continue to decline for up to another year and it would take two further years before the level of output enjoyed at the start of 2008 would be reached again.”

Figures yesterday showed British manufacturing sector shrank the most since records began in 1968 in the first quarter of 2008. Much of which was attributed to the ailing car manufacturing sector – production fell by over 30%, say the Office for National Statistics. Generally, manufacturing contracted by 12%.

If there is any good news to be gleaned from this information it is that manufacturing’s output was not as bad as predicted. Production shrank by a smaller than anticipated 0.9% in February, which is a marked improvement on the 3% drop in January – the lowest decline for six months.

Economists are hoping that the rate of decline is starting to moderate, encouraged by February’s figures.