The raw figures were that GDP fell by 0.7%. There are factors to be taken into account that mean the fall is as not as bad as it seems, but once they are accounted for GDP would still have fallen. This 'second recession' means that the UK is far from a recovery that will provide the income and jobs people need.
It is an odd type of recession however. It's a recession that is creating jobs, 180,000 in the last three months. That is not typical, recessions should see fewer jobs.
So what is the cause of the problem?
* The main problem is the world economic situation. Markets are weak and so sales are down. The continuing Euro saga means that confidence is low in financial markets and with the overhang from the 2007/8 global financial crisis banks are not lending.
* The EU is the UK's largest export market and recession there means that they are buying less from us. This shows how interdependent economies are.
* Consumer confidence is very low which means consumers are saving (about 8% of income at present, up from 1 to 2% during the period before 2008).
* The governments of the world are very concerned about the level of debt they hold and are making efforts to reduce it. This means higher taxation and lower government spending (and jobs) and so in the short term this helps to contract the economy.
Some people argue for greater government short-term stimulus to rectify the current problems. This would mean stopping the deficit reduction program (or at least delaying it). It also means government investment in infrastructure and probably tax cuts.
Most people completely overestimate the ability of governments to influence economic activity. Governments are actually pretty powerless even when they act together, but when they are seen to be acting this often raises consumer and business confidence. That seems to be the key now, not actually what is done, but being seen doing more.
Of course the weakness of the financial system will remain and it is, frankly, a house of cards which could collapse at any moment. But for once the illusion of Keynesian style stimulus packages might actually be what we need and its about time these cheap conjuring tricks were given top billing.
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