The British economy grew at its weakest annual pace in more than 12 years in the second quarter of 2005 as manufacturing fell into recession.
The Office for National Statistics said today gross domestic product rose by just 0.4 per cent in the three months to June. This was the same rate as the first quarter but weaker than the 0.5 per cent predicted by analysts.
That meant output was 1.7 per cent higher than a year earlier, its weakest rate since the first quarter of 1993 when Britain was just coming out of an economic slump.
Interest rate futures rose as traders became ever more certain that borrowing costs would fall from their current 4.75 per cent next month, especially following news this week that four out of nine Bank of England (BoE) policymakers had wanted a quarter-point reduction earlier in July.
The latest growth data were also much weaker than the 2.55 per cent annualised pace predicted for this quarter by the BoE in its May Inflation Report, although that forecast was made before the significant Bluebook revisions last month.
The ONS said quarterly growth was driven by the service sector that accounts for nearly three-quarters of the economy and expanded by 0.6 percent in the second quarter, a weaker rate than in the first.
Within that, the hotels, distribution and restaurant category expanded by 0.5 per cent and was up 0.9 per cent on the year, the weakest rate in 10 years. Manufacturing output fell by 0.7 per cent following a 0.9 per cent fall in the first quarter, meaning the sector is now in technical recession.