Pound gains as economy shrank ‘less than thought’

<p>Sterling has advanced following news the economy shrank less than expected in the second quarter.</p>

The pound has made gains in forex trading today as it has emerged the UK economy shrank by less than thought in the second quarter of 2012.

According to the Office for National Statistics' third estimate of gross domestic product for the April-June period, the economy retreated by 0.4 per cent – the bureau has initially predicted a contraction of 0.7 per cent – before revising this to 0.5 per cent in August.

Analysts had not expected this figure to go down further after the second flash estimate.

But despite the good news that the recession is not as deep as once thought, GDP is still contracting, with the economy shrinking for three consecutive quarters.

It is hoped that the third quarter, however, will show a rebound thanks to the London 2012 Olympic and Paralympic Games and improved unemployment figures.

At 11:30 BST, sterling was 0.2 per cent higher than the dollar to £1 buying $1.620, while it also made gains against the euro – rising 0.4 per cent to £1 for every €1.260.

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