The UK has officially entered a recession according to Government statistics which show that gross domestic product (GDP) contracted by 1.5 per cent in the last quarter of 2008.
The official definition of a recession is the reduction of a country's GDP for at least two consecutive months. The latest fall of 1.5 per cent follows a constriction of 0.6 per cent in the third quarter of 2008, making the much speculated UK recession official.
This is the first time the UK has officially entered a recession since 1991, and as unemployment escalates and more and more companies are forced into administration, there are no immediate signs of recovery.
Recession has been imminent in the UK since the onslaught of the credit crisis which began as a result of sub-prime mortgage
lending in the US. Since then the problem has escalated and the entire UK banking
system has entered crisis mode twice as the Government has been forced to pick up the pieces of their irresponsible lending.
Early predictions of the Government growth statistics were that UK GDP shrank by 1.2 per cent between October and December 2008. However, the reality is that the constriction excelled experts' expectations.
As a result, sterling has fallen to a 24 year low against the dollar, and the FTSE has fallen below 4,000 for the first time since early December.
It was manufacturing output that made the largest contribution to the slowdown, as the Government statistics show a fall of 4.6 per cent compared with a 1.6 per cent fall in the previous quarter. This is evident in the number of jobs that are being lost nationwide.
Nevertheless, economists are looking for those much reported 'green shoots of recovery'; Roger Bootle, economic advisor at Deloitte told the BBC's
Robert Peston that as soon as consumer confidence picks up, we can be reasonably sure that a "recovery is on its way."
However, consumer confidence is still falling according to the December Consumer Confidence Index from Nationwide, suggesting that recovery is a way off yet.
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