British economy shrinks less than thought

Britain's recession-hit economy shrank by slightly less than thought in the second quarter compared with output in the first three months of the year, official data showed on Thursday. "UK gross domestic product (GDP) in volume terms decreased by 0.4 percent between the first and second quarter of 2012, revised from a previously estimated decline of 0.5 percent," the Office for National Statistics said. The slightly improved revision matched analysts' consensus forecast. GDP meanwhile shrank by 0.5 percent in the April-June period compared with the second quarter in 2011, the ONS said in a statement. The statistics office added that industrial output and construction had contracted less than previously thought. Services sector output -- the British economy's main driver -- shrank by 0.1 percent -- unchanged from the previous ONS forecasts in August. Many analysts expect Britain to have emerged from recession in the third quarter, or three months to September 30. Markets will have to wait until next month for confirmation. "The economy should rebound in the third quarter," said Vicky Redwood, chief UK economist at Capital Economics research group. "But we still expect the underlying performance of the economy to remain weak and GDP may even contract again in the fourth quarter," she said in response to Thursday's data. Britain escaped a deep downturn in late 2009 but fell back into recession at the end of 2011. The Conservative-Liberal Democrat coalition government blames Britain's economic ills on the debt crisis in key trading partner the eurozone and on the high level of debt inherited from the previous Labour administration. But the main opposition Labour party claims that Britain's downturn is mainly a result of hefty cuts to state spending by the coalition that have resulted in thousands of job losses across the civil service. The Treasury welcomed Thursday's GDP figures. "The UK is continuing to deal with real challenges at home and abroad, and the government's relentless focus is on addressing them and supporting growth in the economy," a statement said. "There are signs the economy is healing: the deficit is down by a quarter; inflation has halved and employment is rising with more than a million private sector jobs created in the last two years." But hopes of an instant boost to the economy's battered retail sector from the recent London Olympics have failed to materialise. Official data last week showed that the sporting spectacle in late July and early August had a negative impact on the British retail sector, as consumers sat at home watching the Olympics on television rather than shopping.