UK sinking back into recession

COMMENTARY The U.S. economy is slowly crawling out of its hole, as the Federal Reserve affirmed yesterday. But at least it's not sliding back into the pit, like the U.K.

New economic data shows that Britain's GDP fell 0.2 percent in the fourth quarter of 2011, down from growth of 0.6 percent in the previous period. That represents the U.K.'s first economic contraction since the final quarter of 2010. In short, the country is sliding back into recession, with economists expecting another dip in the first quarter of this year. As one expert tells the Wall Street Journal:

"Our bet is that the U.K. is now back in recession and that the economy will continue to contract for most of this year," said Vicky Redwood, chief U.K. economist at Capital Economics.

The following chart, released this week by the U.K.'s Office of National statistics, illustrates that looming double-dip, with growth slowing across the economy:

The U.K.'s GDP shrank 0.2 percent in the final quarter of 2011, putting the country on the brink of recession.

/ Office of National Statistics

Several factors are hurting the British economy: slowing manufacturing, rising unemployment, stagnant wage growth, decreasing construction activity, and dimming consumer confidence -- and, of course, Europe's raging debt crisis.

The decline in factory output in the U.K. owes directly to the ongoing troubles in the eurozone. Roughly 40 percent of U.K. exports head to the Continent, but much of the region's consumers are in no position to shop. The IMF said this week that the eurozone is "deeply in the danger zone" and predicted that the 17-member monetary bloc would fall into a "mild" recession this year. 

What the U.S. can learn from the U.K.: Don't be stupid
Grand illusion: Why Europe should question the wisdom of "austerity"
Austerity Kool-Aid: The U.S. is repeating Europe's mistakes

Despite this deterioration, the U.K. for now is sticking with its policy of slashing government spending and raising taxes -- the sort of "austerity" measures that most economists think can snuff out a fragile economic recovery. We'll see how long the Brits keep their heads in the sand.

[MagnaCartaUK]

Poor Mr. Sherter, alas in his frenzied hurry to rubbish us he failed to note that at least here in the U.K. millions aren't denied healthcare solely on their ability to pay. A friend of mine was recently unemployed for two years, and during that time was diagnosed diabetic; he received free treatment and medical equipment, also free dental treatment in the form of extensive root-canal surgery, free N.H.S. eye tests and free access to an N.H.S. dietician - and all in impoverished Britain. (How much would that cost you Mr. Sherter if you were unemployed)? My friend's health stabilized, he eventually secured employment via a scheme that allies employers with the long-term unemployed, and is now doing very well thank you. Free State healthcare in action! Our economy is struggling, but we know that we'll rise again eventually - and quicker still if we were without the handicap of millions of pounds of OUR money going to FUND the E.U. every single day. Contrary to 'Mr. Sceptic's report however, there are very encouraging medium and long-term indications to our recovery - particularly in exports to Asia. All that, AND the unemployed, vulnerable, sick and incapacitated of society being generously protected by the State too! Poor Mr. Sherter must be having a cardiac on discovering the meaning of civilization. Perhaps he doesn't believe in 'society', THE poor misguided man. Still, at least he alone thinks he knows best - pfttt.

[magnumdr]

I wouldn't feel so bad about being poor if our elected people didn't make so much money and have great benefits that we don't have! When are these people going to start to enjoy making less on their paychecks and benefits like the rest of us do?. Are these people above this problem?.

[magnumdr]

Sinking back? When did we ever leave it!

[ckaspereli]

The indicators show great improvement despite the author's poor prognostication. Perhaps he has failed to realize that nothing increases monotoically without some negative feedback? It may take years (and it will) but it's taken years to get here too.

[Palq81]

The rising of US and EU for last 20 years is mostly virtual. Now we can see that reality is coming. The economic system are closing and entropy are rising. Soon we will see a collapse. What a beautiful time!

[robbyr2]

Too bad the article doesn't explain that the drop in GDP is the direct result of cutting government spending, which is a part of the GDP.
And most Europeans are still doing far better than 99% of Americans. If you compare the income of the poorest 80% of Americans and the poorest 80% of Europeans, they win.

[stephand]

Maybe it is because the rich people are taxed too much in the US. One recent OECD study showed that the top ten percent in America pay a larger share of total taxes, 45.1%, than do the top ten percent in any of the 24 countries examined. In Germany they pay 31% of the taxes, in France 28%

[MagnaCartaUK]

Yes stephand, but in France - traditionally a socialist country, and Germany they generally believe in supporting their fellow French and German compatriots. In other words, they take national pride in helping their fellow countrymen less fortunate than themselves. That's a mark of TRUE patriotism, rather than the 'designer variety' exhibited at suitable points in time. EVERY French and German person I know or have ever met endorses that sentiment. Maybe it's 'a European thing', but nevertheless we're better off for it. I just feel sorry for all the Italians, Spaniards and Greeks whose governments and the oppressive E.U. have continually let them down either through fostering corruption, incompetence, or dirty capitalism as opposed to a mentality of integrity in business or towards their own people.

[RobAla]

Remember when President Obama and other progressives pointed to Europe as a model for the United States? No thank you. The democratic republic US of the past was the model for the world, not failing socialist democracies of Europe. We have to elect a new President who understands this.

[evelin-irene]

robbyr2 and robala,
The UK Government did exactly what the Repub suggest, they cut and cut the Government and know they have a problem.

[moshe05]

when did anyone ever say that the US should model themselves on 'european' policies? did it happen that one made-up, wholly fabricated time--you know, the one your coworker told you about?