UK sinking back into recession

(MoneyWatch) 

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.

(Credit: 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.

[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!

[hypnotoad72]

Your last sentence proves how twisted and sick your mind has become.

Unless you're a certain figure out of mythology that glorifies gloom and doom... and we don't need that disgusting mindset poisoning everyone else.

[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.

[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?