Optimists beware: the economy is still shrinking at a sharper rate than expected

The UK economy shrank by another 0.8% in the second quarter, according to preliminary figures. While the drop was markedly slower than the 2.4% decline in the first quarter of this year, it was still a much sharper contraction than many analysts had hoped for. It also marked the fifth consecutive quarter-on-quarter decline. The larger than expected fall in second-quarter GDP should hold back excessive optimism regarding the speed and sustainability of any UK economic rebound.

Construction – once again – was the main drag on the UK economy. Output plunged by another 2.2% quarter-on-quarter and fell 14.6% on a year ago. This followed a quarterly drop of 6.9% in the first quarter. The seasonally adjusted index of construction output is now down 15% from its peak in the first quarter of 2008 and back to levels seen in the beginning of 2002. 

This article continues at Maren Baldauf-Cunnington's blog