The fall in GDP of 0.2 per cent in 2012 Q1, coupled with the negative growth in the fourth quarter of 2011, means that total output has declined by 0.5 per cent over the last two quarters. The economy has not expanded at all over the last year. Since 2010 Q3, when the economy had grown for five consecutive quarters following the 2008-09 recession, real GDP has contracted by a total of 0.2 per cent.
The fall in GDP in the latest quarter is mainly due to weakness in construction output. Overall services grew by 0.1 per cent while production fell by 0.4 per cent. Within production, most of the weakness was from mining and quarrying which fell by 3.6 per cent while manufacturing fell 0.1 per cent.
In contrast, the headline indicators for the labour market for the three months to February suggest some modest improvement, with employment and hours rising and unemployment falling. However, the underlying detail reveals that the rise in employment was entirely in part time employment, while full-time employment fell for the third consecutive three-month period. The claimant count also continues to edge up, while average earnings wage growth remains subdued.
Over the past year, while the economy has exhibited no growth at all, employment has fallen by 57,000 (three months to February compared with the same period in 2010-2011), a drop of 0.2 per cent, and unemployment has risen by 172,000. The employment rate has fallen from 70.7 per cent of the working age population to 70.4 per cent, although there was a rise from 70.3 per cent in the latest period. In addition, the number of people working part time because they cannot find a full time job is at a record high.
The labour market has adjusted to the fall in output in 2008 and 2009 in part through slower earnings growth, which in the three months to February fell to 1.1 per cent for the whole economy. By contrast consumer prices rose by 3.5 per cent in the year to March.
Earnings have been growing more slowly than price inflation for much of the past four years, and this has been a key influence on the subdued economic recovery so far. The fall in real earnings diminished slightly in the last few months as the rate of consumer price inflation fell back somewhat. Consumer price inflation fell from 5.2 per cent in September to 3.4 per cent in February, as the impact of the rise in the rate of VAT to 20 per cent in January 2011 has dropped out of the annual inflation figure.
However inflation rose slightly to 3.5 per cent in March. With earnings growth continuing to slow, in part because of public sector pay restraint, the gap between growth in prices and earnings has therefore persisted.
Source: Office for National Statistics
GDP: chained volume measures, seasonally adjusted, Office for National Statistics (ABMI)
Employment level: aged 16 years and over, seasonally adjusted, Labour Force Survey, Office for National Statistics (MGRZ)
Total weekly hours: seasonally adjusted, Labour Force Survey, Office for National Statistics (YBUS)
Earnings growth: Total average weekly wage growth for the whole economy, 3 month on 3 month, seasonally adjusted, Monthly Wages and Salaries Survey, Office for National Statistics (KAC3)
GDP data is from the latest release, which is the preliminary estimate of the first quarter of 2012, published on the 25th April 2012.
The labour market data is from the latest “Labour Market Statistical Bulletin” published on the 18th April 2012.
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