UK Avoids A Triple-Dip Recession Thanks In Part To Government Spending

Fears that the United Kingdom would fall into a triple-dip recession eased today, as the country avoided another quarter of economic contraction. GDP data confirmed that the country’s economy did in fact grow, if very slowly, at the beginning of this year:

During the first quarter of this year the country recorded an increase of three-tenths of a percent in gross domestic product, compared with the previous three-month period when it contracted by a similar amount, the Office for National Statistics said. Gross domestic product had been broadly flat over the last 18 months, the agency added.

The growth was driven in large part by an increase in output form the service sector, which grew by 0.6 percent, and from mining and quarrying, which increased by 3.2 percent. These increases were offset by a 2.5 percent decline in construction.

But the jump in growth was also aided by a slight change in policy focus away from deficit reduction. As the country’s leaders have slowed the drive toward austerity, the public sector began to grow instead of shrink. In the first quarter of the year, that sector grew by 0.5 percent, compared to a 0.9 contraction the quarter before, adding 0.1 percent to overall GDP growth.


This news contrasts sharply with figures out of Spain today, a country still struggling with the demand for austerity. The country continues to experience a recession, now for seven consecutive quarters. Its unemployment figure has climbed above 27 percent, a number it hasn’t experienced since 1976, the year its dictator Francisco Franco died. The public sector in Spain has increased firings in education and health to reduce deficits, causing employment in those sectors to fall to 2.85 million from 2.92 million at the end of last year. Private sector employment also fell from 13.9 million to 13.6 million.

Spain’s prime minister is looking to convince investors and other European Union countries to ease its deficit targets next month. He may find a friendly ear, as a top EU official recently indicated that he’s in favor of shifting the focus away from austerity and giving countries more time to reduce their deficits, and the EU’s economic and monetary affairs commissioner has voiced a similar opinion.