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UK GDP Shrinks Most Since 1979

The UK economy contracted at the joint fastest pace since 1979 as measures taken to reduce the spread of coronavirus weighed on all sectors, revised data published by the Office for National Statistics showed Tuesday.

Gross domestic product fell 2.2 percent sequentially instead of 2 percent decrease estimated initially and followed a nil growth in the fourth quarter of 2019. The latest drop was the joint largest contraction since the third quarter of 1979.

On a yearly basis, GDP was down 1.7 percent in the first quarter, revised down from 1.6 percent estimated in May.

The ONS said this release captures the first direct effects of the coronavirus pandemic and the government measures taken to reduce transmission of the virus.

The services, production and construction sectors provided a negative contribution to growth. Services output fell by a record 2.3 percent, revised down by 0.4 percentage points.

Production output fell by a revised 1.5 percent, driven primarily by a 1.1 percent drop in manufacturing. Output was down for the fourth straight quarter.

There was a fall in construction output of 1.7 percent following a 1 percent decrease a quarter ago.

On the expenditure-side, private consumption, government consumption and net trade provided a negative contribution to growth.

Household consumption declined 2.9 percent, the largest decline since 1979 and government spending was down by revised 4.1 percent.

Gross fixed capital formation decreased 1.1 percent in the first quarter, reflecting declines in government investment, dwellings investment and business investment.

Business investment fell 0.3 percent in the first quarter.

Further, data showed that the UK posted a trade deficit of 0.2 percent of nominal GDP in the first quarter compared with an initial estimate of 0.9 percent.

The current account deficit widened to GBP 21.1 billion from GBP 9.2 billion in the fourth quarter. This was mostly because of erratic movements in the trading of precious metals.

Annual GDP growth was estimated to have been 1.5 percent in 2019.

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