LONDON (Reuters) - Britain did not suffer a double-dip recession early last year as previously thought, but household living standards suffered their biggest drop in a generation at the start of 2013.
The Office for National Statistics said on Thursday that following a major annual revision of historic economic data, figures now showed that output flat-lined in the first three months of 2012 rather than contracting.
This meant Britain did not suffer the two consecutive quarters of contraction which commonly define a recession - fillip for Chancellor George Osborne, whose spending cuts since 2010 are blamed by political opponents for causing unnecessarily slow economic growth.
However, other figures from the ONS were almost unremittingly grim.
Britons’ real disposable income fell by 1.7 percent in the first three months of 2013, the biggest quarterly drop since 1987, driven down by an outright fall in wages and rising prices, causing households to reduce their savings to the lowest share of income since early 2009.
Britain’s current account deficit with the rest of the world unexpectedly widened to 3.6 percent of gross domestic product and business investment slumped by 16.5 percent on the year, casting doubt on government hopes for an economic recovery driven by exports and capital spending.
“Overall it does look as if UK economic history has been revised in a negative direction,” said Victoria Clarke, an economist at Investec.
“It certainly looks as if the UK is a step further away now from ‘escape velocity’. We suspect that this, coupled with some inflation projections in August, will be enough to tilt the balance for the (Bank of England) to sanction more QE,” she said, referring to asset-buying quantitative easing.
Further historic revisions now also show that the recession between the second quarter of 2008 and the second quarter of 2009 inclusive was deeper than thought, leading to a 7.2 percent fall in output, compared with previous estimates of a 6.3 percent fall.
Britain’s slowest economic recovery on record since then means that output is still 3.9 percent below its pre-recession peak - compared with an earlier estimate of 2.6 percent below.
The one figure that was not revised was the estimate of 0.3 percent quarterly growth in the first three months of 2013, a figure that surprised many economists who had been fearing a ‘triple-dip’ recession before it first came out in April.
Other recent data and surveys have also pointed to a strengthening of growth in the second quarter, with the Bank forecasting a 0.5 percent expansion.
However, the economy remains fragile and many economists expect the central bank to restart its quantitative easing asset purchases of provide other stimulus soon after former Canadian central bank chief takes Mark Carney takes over from governor Mervyn King on July 1.
Additional reporting by Olesya Dmitracova Editing by Jeremy Gaunt