The downward revision to GDP in the first quarter means that the recession has been even deeper than previously thought. The 2.4% quarterly drop in GDP means that output has now fallen by a total of 4.9% – comparable to the falls seen at the same stage in previous recessions. (See Chart.) Timelier indicators suggest that the rate of contraction has since eased. But it seems clear that a large amount of spare capacity is building up, which will keep a lid on inflation for some time yet.
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