U.K. Economy Barely Grows In April After Double-Dip Recession

By Tzu-Wen Chen,

THETAKEAWAY: [U.K. economy grows 0.1% in three months toApril] > [March GDP revision puts U.K. economy into firstdouble-dip recession since 1975] > [ GBPUSD weakens ]

The British economy barely grew in the three months through April, after contracting in the first quarter. The National Institute of Economic and Social Research (NIESR) reported today that the U.K.’s Gross Domestic Product (GDP) probably grew by only 0.1 percent. Meanwhile, the Institute revised its first quarter GDP estimate downwards to a contraction of 0.2 percent from 0.1 percent growth initially reported. This marks three consecutive quarters of contraction, which puts the U.K. economy into its first double-dip recession since 1975.

The NIESR said that growth will remain ‘flat’ over the next six months and projected that recovery of the U.K. economy would not fully take hold until 2013. With a stagnant economy, the negative output gap is likely to widen further, which would signal additional slack in the economy such as ongoing high unemployment and idling production lines.

Earlier today, the Bank of England’sannounced its decision to hold the benchmark interest rateunchanged at 0.50 percent and the Bank’s Asset PurchaseTarget unchanged at 325 billion pounds. The Bank resisted expanding its stimuluspackage as inflation risks mount. The latest GDP estimates further support theBOE's monetary policy decision to maintain low rates in a bid toencourage economic growth.

GBPUSD 1-minute Chart: May 10 , 2012

Chart createdusing Market Scope – Prepared byTzu-Wen Chen

The market reaction to the data release was mixed,with the British pound initially gaining as much as 10 pips againstthe U.S. dollar before reversing its direction. At the time of thisreport, the GBPUSD pair had taken a nosedive and was trading lowerat $1.6166 to the pound.

--- Written by Tzu-Wen Chen, DailyFX Research
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/05/10/U.K._Economy_Barely_Grows_in_April_After_Double-Dip_Recession.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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