Rain forecast to have hit economy

Fears that the double-dip recession persisted between April and June are set to be confirmed next week as figures show the Diamond Jubilee and record rainfall kept the economy in the doldrums.

Gross domestic product (GDP) - a broad measure for the total economy - is forecast to have shrunk for the third quarter in a row by around 0.4% between April and June. The extra bank holiday granted on June 4 for the royal celebration and the wettest April-to-June period since records began in 1910 hit output, analysts said.

Philip Shaw, economist at brokers Investec, who has forecast a 0.4% decline in the second quarter, said: "Data over the past month or two have done little to suggest any meaningful recovery."

He added: "Indeed it seems highly likely that the second quarter data will show the economy suffering its third consecutive quarter of contraction."

The preliminary estimates - which are subject to revision - will be released by the Office for National Statistics (ONS) on Wednesday.

The economy entered a technical recession in the first quarter of the year, with GDP declining 0.3%, following a 0.4% drop in the final quarter of 2011.

A dismal performance from the nation's builders has weighed considerably on overall growth with Mr Shaw predicting a "disaster" for the industry in the second quarter. The economist said output in the construction sector could have fallen by as much as 6% between April and June, following a 4.9% drop in the first three months of 2012.

The powerhouse services sector - which makes up some three-quarters of the total economy - is also on course to deliver a disappointing result following a series of weak surveys from purchasing managers.

Furthermore, retailers - one of the few types of business that was expected to receive a boost from the Jubilee - saw sales grow by a mediocre 0.1% in June after the ONS said the royal event had "no significant impact".

There is some light at the end of the tunnel with most economists predicting a return to growth in the third quarter - partly driven by the London Olympics.