U.K. second-quarter GDP seen falling 0.2% As recession deepens

The U.K. economy probably shrank for a third consecutive quarter in the three months through June as a double-dip recession deepened, economists said.

Gross domestic product fell 0.2 percent, according to the median estimate of 36 economists in a Bloomberg News survey completed today. It shrank 0.3 percent in the first quarter and 0.4 percent in the last three months of 2011. The Office for National Statistics will publish the data on July 25.

The Bank of England expanded its emergency bond-purchase program this month and introduced measures to boost lending. The International Monetary Fund said this week that the recovery has “stalled” and the government may need to consider easing its fiscal squeeze if central bank efforts fail to help the economy gather momentum.

“Tight fiscal policy and still significant problems for consumers” will “limit U.K. economic activity,” said Howard Archer, an economist at IHS Global Insight in London. “Ongoing euro-zone sovereign debt problems and weakened economic activity are expected to continue to weigh down on U.K. recovery prospects.”

From a year earlier, the economy probably shrank 0.3 percent in the second quarter, according to a separate Bloomberg survey. Activity in the quarter was probably affected by the extra public holiday for the queen’s Jubilee in June.

Bank of England policy makers expanded stimulus by 50 billion pounds ($78 billion) to 375 billion pounds on July 5. In the minutes of the meeting, they said they may review the merits of cutting their benchmark interest rate, currently at a record- low 0.5 percent.

BNP Paribas forecast earlier today that the central bank will lower the key rate by 25 basis points in November and increase its bond program by another 50 billion pounds.

--With assistance from Mark Evans in London. Editors: Fergal O’Brien, Andrew Atkinson

To contact the reporter on this story: Scott Hamilton in London at shamilton8bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1bloomberg.net