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UK economy shrinks less than forecasted

30 September 2009 10:20 (UTC +04:00)

Bakuâ€“ APA-Economics. Britainâ€™s economy shrank less than previously estimated during the second quarter of the year, according to revised official figures Tuesday, supporting hopes that it will exit recession and return to growth in the current quarter.
The Office for National Statistics said gross domestic product contracted by 0.6 percent in the April to June period compared with the previous quarter -- revising its earlier estimate of a 0.7 percent decline. Better performance in the construction industry helped drive the change.
Britainâ€™s economy shrank 5.5 percent between the second quarter of this year and the same period a year earlier.
Rounding out the positive economic news, the Bank of England reported that mortgage lending bounced back during August after being negative for the first time on record in July. Net new borrowing for home purchases rose by 1 billion pounds in August, after shrinking for the first time on record in July as Britons repaid their mortgages at a faster rate than they borrowed.
Meanwhile the number of loans approved for house purchase dipped in August to 52,317 from 52,404 in July, the Bank said. Mortgage approvals do not always lead to money actually being advance to a borrower.
Brian Murphy, head of lending at independent mortgage brokers Mortgage Advice Bureau, said, "The reality is that mortgage approvals are still at very low levels and are likely to remain that way for the foreseeable future while lending conditions continue to be extremely challenging."
Consumer credit fell by a net 300 million pounds as shoppers opted to save rather than spend in August, the data also showed.
"British consumers are tightening their belts like never before," said David Breger, a partner at HW Fisher Chartered Accountants. "In the space of around 18 months, we have changed from a nation of spenders, piling on debt, to a nation of savers, paying it down," Breger said.
Many analysts expect economic growth to resume in the third quarter of the year, after bottoming out in a 2.5 percent contraction in the first three months of the year.
Growth in the third quarter would be the first quarterly rise since early 2008, marking the official end of the 2008-09 recession.
Any rebound is likely to be fragile however, one economist warned. Vicky Redwood, a UK economist at Capital Economics, cited weak lending growth and a widening trade deficit among the signals that any growth is likely to be pretty modest." Source: Businessweek