Britain's economic downturn eased in the second quarter, official data showed yesterday, boosting hopes that the country may soon follow France and Germany out of recession.
Gross domestic product contracted 0.7 per cent in the second quarter of 2009 compared with the first three months of the year, in the fifth quarterly drop in a row, the Office for National Statistics said in a statement.
That was a modest improvement on the previous estimate of a 0.8-per cent contraction.
However, the economy shrank 5.5 per cent in the second quarter on a year-on-year basis. That marked the biggest drop since records began in 1955, but was better than the 5.6 per cent contraction estimated last month.
"The revised figures boost hopes that we could see positive growth next quarter and Britain could follow hot on the heels of France and Germany out of this recession," said City Index analyst Joshua Raymond.
France, Germany and Japan all exited recession in the second quarter, it was announced earlier this month, after the world's worst financial crisis in decades.
The ONS said yesterday that an improved performance from Britain's manufacturing and production industries helped lift GDP in the three-month period.
The quarterly reading was in line with market expectations, but analysts had not been expecting any change to the annual number.
The British economy slumped into a deep recession last year, contracting in the second, third and fourth quarters of 2008, as it was hammered by the global financial crisis.
The pain continued in the first quarter of 2009 when GDP shrank by 2.4 per cent - the fastest quarterly rate of decline since 1958.
Yesterday's latest data sparked hopes that the battered economy could have turned the corner in the worst downturn in decades, said Ernst & Young economist Hetal Mehta.
"With recent survey data showing the economy in a much healthier state, we expect third-quarter GDP data to show a marked improvement and a positive outturn could be on the cards," Mr Mehta said.
Other analysts were more downbeat in their assessment of Britain's economic outlook, pointing to tight credit conditions, soaring unemployment and the prospect of future tax rises to pay for a costly banking-sector bailout.
"The slight upward revision to UK GDP in the second quarter is pretty insignificant," said economist Vicky Redwood at the Capital Economics consultancy.
"With tax rises looming, the labour market weakening and credit conditions still tight, any recovery in private sector demand will be weak. We continue to expect a pretty minimal rise in GDP next year."