The UK economy barely grew in the second quarter of 2011, GDP up just 0.1 per cent, as the IMF said deficit reduction should not be at the expense of growth.
The timing could not have been worse for the government, the depressing figures emerging in the run up to David Cameron’s speech to the Conservative party conference this afternoon, in which he will signal no change in the coalition line, insisting:
“Our plan is the right one and our plan will work.”
Responding to the grim news in the UK and the eurozone – Italy’s credit rating was cut by Moody’s overnight – the IMF said a stimulus was needed, that a eurozone solution is “overdue”, and warned governments against pursuing deficit reduction at the expense of growth.
The IMF say:
“The pursuit of nominal deficit targets should not come at the expense of risking a widespread contraction in economic activity… finding a durable solution to the euro area sovereign crisis has become more than overdue.”
• UK gross domestic product (GDP) in volume terms increased by 0.1 per cent in the second quarter of 2011;
• Output of the production industries fell by 1.2 per cent, within which manufacturing rose by 0.2 per cent;
• Output of the service and construction industries increased by 0.2 per cent and 1.1 per cent respectively;
• Household final consumption expenditure decreased by 0.8 per cent in volume terms in the latest quarter;
• In current price terms, compensation of employees increased by 0.4 per cent in 2011 quarter two.
And to further dampen the mood, the IMF also warned a global recession in 2012 “can’t be ruled out”, citing the possibility “activity will turn downwards”.
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• Barroso joins the international push for Plan B – Alex Hern, September 28th 2011
• Without growth will we even halve the deficit? – Cormac Hollingsworth, September 20th 2011
• IMF: Cutting the deficit too fast causes higher unemployment – Tony Dolphin, September 19th 2011
• New IMF boss joins calls for Plan B – Will Straw, August 16th 2011
• IMF backs Osborne – but warns of risks ahead – Tony Dolphin, June 6th 2011