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British GDP worse than expected

British GDP has shrunk for the third quarter in a row, falling 1.9% in the first quarter of 2009 according to the Office for National Statistics. The consensus expectation was a 1.5% fall.

The decline was attributed to weaker services and production output. It followed a 1.6% fall in the fourth quarter of 2008.

Total production output fell by 5.5%, compared with a fall of 4.5% in the previous quarter. Services output dropped by 1.2% after a decline of 0.8% in the fourth quarter.

According to Capital Economics, the provisional GDP figures suggest the recession has so far been even deeper than previously assumed.

Vicky Redwood, a UK economist at the consultancy, said in a statement: “It’s early days yet, but the drop opens up the possibility of GDP in 2009 as a whole falling by even more than the 4% we currently expect. It also deals an instant blow to the Chancellor’s forecast of a 3.5% drop in GDP this year.”

“For that to be achieved, GDP would have to be broadly flat from Q2 onwards – yet the surveys are already pointing to another fall of 1% or so in Q2.”

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