Double-dip recession deeper than originally feared

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The double-dip recession is deeper than feared as revised figures showed a sharper decline in the economy in the final quarter of 2011. Photo: Reuters

A decimal point here or there doesn't normally matter much when describing growth of an economy. But these aren't normal times and this morning we learned the shallow double-dip recession is a little bit deeper than we thought.

Official figures confirmed the British economy shrank by 0.3 per cent in the first three months of this year and that it shrank by 0.4 per cent in the three months before that, revised down 0.1 percentage points from the original estimate.

It's not a huge shift but it adds grist to the mill of those calling for a change of course by the Government to focus on growth.

Ed Balls, Shadow Chancellor, has long been vociferous on the topic, earlier this week pointing out growing Government borrowing as evidence that George Osborne's programme of austerity is failing to bring debt under control despite imposing tough conditions which make growth elusive.

The Chancellor has already extended by two years the targets for the deficit and, with the Bank of England, announced a 'funding for lending' programme to try to get money into the economy.

Chancellor George Osborne.
Chancellor George Osborne. Credit: Reuters

Today's figures combined with data on the cost and availability of debt to businesses make it more likely that the Bank will also restart QE next week, effectively printing money to pump in to the economy.

The Chancellor is always careful to emphasise that the Government itself is only able to borrow at record low levels because of the credibility the commitment to control the deficit lends him.

However, the steady stream of negative data, the forecasts from economists for the rest of the year for a flat or shrinking economy and the threat from the eurozone crisis beg the question how much longer that can be the only yardstick the markets use.

At some stage investors' confidence may draw as squarely on growth (or the lack of it) as on deficits.