UK economy closer to recession

London - Britain's economy came closer to a recession on Friday after official data showed it had slowed further during the second quarter as the construction and manufacturing industries weakened.

Gross domestic product grew by only 0.2% in the April to June period compared with the first three months of 2008 - the slowest pace for more than three years, according to the Office for National Statistics.

"Weaker construction and production output drove the deceleration in growth, which was partially offset by increased growth in the service industries," said the ONS.

The data matched analyst consensus forecasts after Britain's economy grew 0.3% in the first quarter of 2008 compared with the final three months of 2007.

"The 0.2% rise ... shows that the economy has weakened dramatically even before the full impact of the credit squeeze and housing downturn has been felt," said Capital Economics analyst Paul Dales.

"An outright recession is now our central scenario. With industrial production having fallen in both, industry is already in recession.

"Overall growth would have been much weaker if a gain in transport and communication output did not push services output growth up from 0.3% in to 0.4%," said Dales, an expert on the British economy.

The ONS added on Friday that Britain's economy had grown 1.6% during the second quarter when compared with the year-earlier period - the smallest annual expansion since the second quarter of 2005.

The month-on-month figure of 0.2% growth was also the slowest quarterly gain since the first three months of 2005.

Britain's economy expanded 2.3% during the first quarter when compared with the year-earlier period.

The technical definition of a recession is when an economy contracts for two or more quarters in a row.

- AFP