Broad-based weakness keeps economy in recession - Ernst & Young - United Kingdom

• The poor August industrial production data led us to revise down our forecast for Q3 GDP, but we were still surprised by this weak figure.
• Today’s figures are at odds with much more upbeat survey data.
• With all of the components showing falling output, it underlines the broad-based weakness in the economy, which is not confined to the manufacturing sector.
• We still expect some recovery in Q4 as consumers bring forward planned purchases to avoid the increase in VAT on 1st January. However, this will exert a drag on growth in 2010Q1. 

"The poor August industrial production data led us to revise down our forecast, but we were still surprised by this weak figure. Today’s figures are at odds with much more upbeat survey data. GDP fell 0.4% in Q3, keeping the economy in its longest recession since records began in 1955.

"With all of the components showing falling output, it underlines the broad-based weakness in the economy rather than a weakness confined to the manufacturing sector.

"But it appears that the ONS has made some fairly conservative assumptions about September output data, and once more data is available, there is a strong possibility that the Q3 figures will be revised up.
 
"We still expect some recovery in Q4 as consumers bring forward planned purchases to avoid the increase in VAT on 1st January. However, this will exert a drag on growth in 2010 Q1.

"It is becoming increasingly clear that the recovery, when it does begin, will be slow and bumpy and the economy will struggle to achieve 1% growth next year."