Britain is in trouble. The economy is shrinking and sterling is at a low
LONDON (Reuters) - The pound extended its slide on Friday to its lowest level in more than two years after an unexpected contraction in the British economy in the second quarter.
The pound, which has lost 3.7 percent against the US currency since Boris Johnson became prime minister in late July, fell to $ 1.2056, its weakest level since January 2017.
By 15:50 GMT, the British currency had recovered slightly to $ 1.2072, but remained 0.5% below its previous close.
Against the euro, sterling also fell to a fresh two-year low of 92.88 pence.
The pound is close to being the worst performer among the currencies of developed countries in the past two weeks since Johnson became prime minister on July 24.
According to data from the Office for National Statistics, Britain's economy contracted at a quarterly rate of 0.2%, the first contraction since 2012, after achieving a growth rate of 0.5% in the first quarter.
On an annual basis, economic growth slowed to 1.2 percent from 1.8 percent in the first quarter, the weakest performance since the start of 2018.
The construction sector contracted 1.3 percent and manufacturing fell 2.3 percent in the second quarter of 2019, the National Statistics Office (Hukoomi) said in a statement on Friday.
But the new finance minister, Sajid Javed, told the BBC he did not believe the economy would slide into full recession.
What is the economic downturn?
The economic downturn has slowed real GDP, which is one of the stages of the economic cycle that goes back to growth, but its length has become a worry for policymakers in capitalist economies.
The economic downturn is often accompanied by a decline in aggregate demand due to lower consumption and investment, higher unemployment and lower asset values (eg stocks and real estate).