UK Economy Shrank More than Initialy Estimated
THE TAKEAWAY: UK GDP for Q1 Revised Lower to -0.3% from -0.2% -> New pressures for BoE to raise stimulus -> Cable briefly drops
The UK economy shrank more in the first quarter than was initially estimated last month. Data released today corrected the drop in GDP from -0.2% to -0.3% when compared to the previous quarter. Year over year, the GDP for the quarter dropped -0.1% instead of staying level as was first released by the Office for National Statistics.
Construction experienced the biggest slowdown during the quarter, dropping by -4.8% compared to the Q4 of 2011.
Two straight quarters of economic slowdown means the UK has entered a technical double dip recession. While the Bank of England decided to keep their stimulus program unchanged in May’s meeting, the International Monetary Fund has called on the BoE to increase its bond purchasing program to stimulate growth in the struggling economy.
Cable took an initial drop towards today’s two month low at 1.5637 following the weaker GDP, but the pair bounced back above yesterday’s low soon after.