“It is difficult to reconcile the very positive recent labour market figures published by the ONS, with the continued declines reported in GDP. Increases in employment, and in the average numbers of hours worked, at a time when output is falling, suggest implausible falls in productivity. We believe the employment figures are more accurate than the output figures, and the GDP figures are likely eventually to be revised up.
UK GDP for Q2 2012: -0.7% on the quarter, -0.8% on the year
Commenting on the preliminary GDP figure for the second quarter, published today by the ONS, John Longworth, Director General of the British Chambers of Commerce, said:
“The first estimate for Q2 GDP is not the news businesses wanted to hear. While many firms are faring better than official statistics may suggest, it’s time for the government to be bold and show leadership. Questions remain about the accuracy of the figures. But it is clear that Britain is in the midst of the most prolonged period of stagnation it has faced in decades. Many of our members are continuing with guarded optimism, but the government must ensure confidence is not damaged further.
“Ministers can’t expect firms to bust a gut to grow if they fail to take a long-term approach to creating an enterprise-friendly environment. Deficit-reduction is vital, and businesses aren’t expecting handouts. But we need a government that will pull the levers only it can reach to help companies export, invest, create new jobs and grow. That means infrastructure investment, the creation of a state-backed business bank to lend to new and growing companies, and meaningful deregulation.
David Kern, Chief Economist at the British Chambers of Commerce (BCC), added:
“The ONS figures show a much larger decline in GDP in the second quarter than most analysts expected, deepening the technical recession. We believe that the disappointing figure paints an unduly pessimistic picture of the state of the economy. While the erratic construction figures were expected to show a large decline, the falls seen in services and in manufacturing are larger than anticipated.
“Business surveys including the BCC’s Quarterly Economic Survey show a more positive picture and we still believe these surveys give a more accurate indication of the underlying trends in the economy.
“Regardless of the uncertainty surrounding the ONS estimate, it is clear that economic growth remains much too low and the economy is stagnating. The main aim must now to focus on measures that will help businesses grow, invest, and create jobs.”