While there was some green light on consumer spending recently, the economy would probably contract again in the second quarter, because the country took an extra day off to celebrate the Queen’s diamond jubilee.
The fourth quarter contraction is expected to be at 0.4%, according to the Office for National Statistics.
The Bank of England signaled at restarting quantitative easing as soon as next month to try to give the economy a lift.
Savings ratio dropped from 6.9% to 6.4%, indicating the drop in spending was more related to weak income than to a choice to save up or pay off debts.
Government spending, in contrast, increased 1.9 per cent in the first quarter, accelerating from a 0.8 per cent increase in the previous quarter.
UK’s widening trade deficit adds misery to the story, reflecting a decrease in exports along with a fall in the profits of UK companies’ overseas subsidiaries.
On a brighter note, business investment is slightly more positive, rising 1.9% from the previous quarter. Manufacturing investment fell 0.3% amid declining output and the crisis in the US, but non-manufacturing investment rose 2.2%.
Chris Williamson, an economist at Markit, said positive business surveys and a rise in employment in the first quarter cast doubt over the accuracy of the GDP data.
“For employment to increase at a time that the economy is contracting is unprecedented in recent history and puts a huge question mark over the GDP data,” he said. “If this is a recession, it is possibly the healthiest one we have ever seen in terms of business optimism and job growth