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From the WSJ:

GDP data are a really nasty and disappointing shock, with the rate of contraction slowing far less markedly than expected. … Performance was dragged down by construction output slumping by 2.2% quarter-on-quarter. Meanwhile, service sector and manufacturing activity still declined at a pretty fair clip. … No details were released on the expenditure side … but it seems highly likely that GDP was dragged down by further substantial de-stocking and still sharply contracting investment. … Furthermore, it is very possible that swine flu could have a significant dampening impact on economic impact over the coming months. – Howard Archer, IHS Global Insight

Today’s figures make the recent suggestion by [Bank of England monetary-policy member] Andrew Sentence about ending the BoEs asset purchase scheme look premature. Indeed, taken together with the deterioration in the recent CBI industrial trends survey for July, suggest we should not take the UK recovery for granted. This could be a very rocky recovery. — Rob Carnell, ING Bank

The key implication of today’s result is that Chancellor Darling’s 2009 forecasts, published in the April 2009 Budget, appear impossible. The Treasury forecast that the economy would contract by between 3.25% and 3.75% in 2009. For this to now happen would require a remarkable bounce back in the second half of the year with growth of around 1.5% in each of the remaining two quarters. — Richard Snook, CEBR


Although the number was surprisingly weak, there are a couple of positive points to draw out: The first is that it is clear confirmation (as seen in the surveys) that the pace of decline moderated after the collapse in output in Q4/Q1. Secondly, it looks as if much of the weakness in affecting the Q2 average took place in the early part of the quarter. It’s a very tentative estimate, but our monthly GDP indicator … for June was at the same level as the Q2 average, suggesting that GDP growth might be flat or even slightly positive in Q3. — Credit Suisse

We expect that Q2 will turn out to be the last quarter of recession (i.e. falling GDP). But, as well as a deep recession, we expect a slow recovery, held back by high private debts and (with inadequate bank capital) poor credit availability. Potential growth also is probably falling markedly, as the IMF warns. — Citi European Economics

The medium-term headwinds facing the UK economy are formidable – rising unemployment, higher mortgage rates, steep tax increases – hence a starting point of greater fragility would be troubling. Full-year 2009 GDP is now on course to fall by in excess of 4.5%. — Ross Walker, RBSM