Hopes that the UK would come out of the recession were dashed today as the economy shrank by 0.4% between July and September. This is the first time the UK gross domestic product (GDP) has contracted for 6 consecutive quarters since records began. The service sector unexpectedly declined with catering and hotels doing particularly badly. Unlike Germany and France who still have manufacturing, the UK is heavily reliant on the service sector and financial services which may have been the reason the recession continues.
The gloomy economic news had an immediate effect on the exchange rate with the £ falling against the $. The UK may soon become the only major economy still in recession. It will also have a negative impact on Labour's hope of re-election as they hoped they would be able to show they were the party to lead the country out of the recession rather than the Conservatives.
Vocabulary
- GDP - the total amount of goods and services produced by a country
- Quarter - 3 monthly period e.g. July-September
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