GDP shrank 0.4 pct q/q in Q2

LONDON Tue Jul 7, 2009 3:09pm BST

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LONDON (Reuters) - The economy shrank 0.4 percent in the second quarter of this year, economic researchers said Tuesday, after weak industrial output data forced it to rethink its view that GDP growth resumed in April.

The National Institute of Economic and Social Research, which produces monthly estimates of gross domestic product growth, said revisions to official data last month suggested the recession had not reached its trough in March after all.

"However, on the basis of the monthly profile we estimate that the UK economy is now stagnating rather than continuing to contract at a sharp pace," NIESR said.

NIESR hit the headlines last month when it proclaimed an end to the recession and said growth returned in April.

However, official data published last week showed GDP fell a sharper-than-estimated 2.4 percent in the first three months of 2009, the biggest fall in 50 years, due to heavy downward revisions to construction and services output. Figures Tuesday showed industrial output, which accounts for almost 20 percent of the economy, unexpectedly fell 0.6 percent in May.

(Reporting by Fiona Shaikh; editing by David Stamp)

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