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  1. Wealth
January 25, 2013

FT: Triple-dip recession looms as economy contracts 0.3%

By Spear's

The economy, which has essentially stagnated for 2½ years, pulled out of its shallow double-dip recession in the third quarter of 2012, but contracted again in the fourth quarter by more than the 0.1 per cent economists had forecast

Britain’s economy shrank 0.3 per cent in the final quarter of last year, slightly more than expected, increasing the likelihood it would slide into a “triple-dip” recession and piling pressure on the coalition government.

The economy, which has essentially stagnated for 2½ years, pulled out of its shallow double-dip recession in the third quarter of 2012, but contracted again in the fourth quarter by more than the 0.1 per cent economists had forecast.

The market reaction was swift and clearly showed traders had been wrongfooted by the extent of the GDP contraction. Sterling, which had been higher versus the dollar at about $1.58, immediately lost 0.5 cents to change hands at $1.5747, while 10-year gilt yields fell 1.5 basis points from their session highs to take benchmark borrowing costs to 2.025 per cent.

A spokesman for the Treasury said: “The official forecast was that the UK economy would contract in the last quarter of 2012 so this figure is not unexpected. It confirms what we already knew – that Britain, like many European countries, still faces a very difficult economic situation.”

Read the full story at ft.com

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