Britain Is officially back in recession 2012 has begun badly. The economy shrank 0.3 per cent in the final quarter of 2011 and then another 0.2 per cent in the first quarter of 2012.
That marks a technical recession, something analysts had thought the UK would narrowly avoid. It also marks the first ‘double-dip’ recession since the economic turmoil of 1975.
And we’re certainly not there yet given the weak recovery – the economy saw below-par 2.1 per cent expansion in 2010 following a 7.1 per cent plunge during the Great Recession of 2009.
While recession this time is expected to be brief and mild – we could exit almost immediately – the overall economic situation is unlikely to dramatically improve any time soon. The median prediction from analysts is for growth of just 0.4 per cent for 2012 with the gloomiest forecasters predicting the economy.
The real fear is that austerity will combine with relatively high inflation, both of which take money out of the pocket of consumers, and hold back the economy. This could degenerate into dreaded stagflation – no economic growth combined with inflation.