UK Contraction Revised to the Upside: -0.5%

The British economy contracted by 0.5% in the second quarter of 2012, according to the first revision of GDP. The initial report was a shocking drop of 0.7%. The UK is still in a serious recession, after it squeezed also in Q1 and Q4 2011.

This is still the biggest drop in output since the first quarter of 2009.  GBP/USD was sliding from highs prior to the release and is now extending its losses.

The UK also released the initial business investment figure for Q2: investment dropped by 1.5%, much worse than an expected rise of 2.8%.

GBP/USD rallied earlier in the week on the higher QE3 expectations and peaked at 1.5910. It now trades at 1.5825. The drops began earlier, with the pair sliding from 1.5870 to around 1.5840.

For more, see the GBPUSD prediction.

A member on Britain’s Monetary Policy Committee, Martin Weale, suggested that a rate cut could also help stimulate the economy. The interest rate is already low: 0.5% for over three years.