Cameron not to abandon austerity plan as UK slips into recession | WPN World People News

Britain's Gross Domestic Product contracted by 0.2 per cent in the first quarter, pushing it into the first double-dip recession since the 1970s, but Prime Minister David Cameron has committed not to abandon his austerity plan.

"The GDP decreased by 0.2 per cent in the first quarter of 2012, driven by weakness in the construction sector and the production sector," the Office for National Statistics said in its report released Wednesday.

The first quarter drop follows the 0.3 per cent decline recorded in the last quarter of 2011, according to the data released.

The official data shows that while industrial output declined by 0.4 per cent in first quarter on the back of 1.3 per cent drop in the previous quarter, it was the construction industry that had hit the hardest with 3.0 per cent decrease in output. In the previous quarter the construction sector declined by 0.2 per cent.

The service industries however witnessed a marginal growth of 0.1 per cent the first quarter, reversing the dip witnessed in the previous quarter.

The report signals that Britain has technically returned to recession two consecutive quarters of negative growth signifies that a country is deemed to be in recession.

This is expected to increase pressure on Prime Minister Cameron, who has faced criticism for promoting austerity instead of government stimulus.

Reacting to criticism by Labour leader Ed Miliband, Cameron said it would be "absolute folly" to abandon his plan to tackle the deficit, despite the UK entering a double-dip recession.

"Let me be absolutely clear. There is no complacency at all in this government in dealing with what is a very tough situation that, frankly, has just got tougher," said Cameron, adding, "This is painstaking, difficult work but we will stick with our plans."

Treasury chief George Osborne said the debt crisis afflicting the 17-country eurozone has impeded Britain's recovery, but announced plans to stick to his "credible plan" to cut the country's budget deficit.

The ONS data was a bit of a surprise as economists surveyed by Dow Jones Newswires had forecast quarterly growth of 0.1% and a 0.4% year-on-year rise.

"Along with the Bank of England and many other analysts, we are hugely skeptical about the first-quarter GDP data showing contraction of 0.2 per cent quarter-on-quarter," said Howard Archer, chief European economist at IHS Global Insight.

"The economy is undeniably still in a hard place, but the evidence overall suggests that it managed to achieve modest expansion in the first quarter," Archer said.

Source: Europe News.Net