The UK economy shrank in the first quarter as a slump in construction pushed Britain into its first double-dip recession since the 1970s. Gross domestic product fell 0.2 per cent from the fourth quarter of 2011, when it declined 0.3 per cent, the Office for National Statistics said today in London. The median of 40 estimates in a Bloomberg News survey was for an increase of 0.1 per cent. A technical recession is defined as two straight quarters of contraction. The Bank of England is in the final month of its latest round of economic stimulus and the drop in output comes as prospects dim in the euro region, Britain’s biggest export market. As an anti-austerity backlash gains ground in Europe, the report may add to criticism of Prime Minister David Cameron and Chancellor of the Exchequer George Osborne’s budget cuts. “This isn’t supportive of the fiscal consolidation programme, so the government is likely to be concerned about that,” said Philip Rush, an economist at Nomura International in London. “The data were bad, and that supports the view that the Bank of England will do a final 25 billion pounds of quantitative easing in May.” UK 10-year gilts advanced immediately after the data were published before easing again. The yield was unchanged at 2.097 per cent as of 11:15am in London. The pound fell as much as 0.4 per cent against the dollar and traded at $1.6101. From a year earlier, the economy was unchanged in the first quarter. The median estimate in a Bloomberg survey of 31 economists was for 0.3 per cent growth from a year earlier. The quarterly drop in GDP was due to a 3 per cent slump in construction, the most since the first quarter of 2009, and a 0.4 decline in industrial production. Manufacturing contracted 0.1 per cent and services, the largest part of the economy, expanded by 0.1 per cent, boosted by transport, storage and communication. The data contrasts with a report today showing confidence among manufacturers rose to the highest level in two years this month. The Confederation of British Industry’s quarterly gauge of factory optimism surged to 22 from minus 25 in January. Separate surveys this month showed that growth in services, manufacturing and construction accelerated in March. The British Chambers of Commerce said the GDP data is likely to be revised higher by the statistics office. Surveys “have shown a more positive picture, and we believe these give a more accurate indication of the underlying trends,” Chief Economist David Kern said in a statement today. “We think it is likely that the preliminary estimate will be revised upwards when more information is available.” Rising energy prices, government spending cuts and anemic wage growth are squeezing consumers, creating a drag on the recovery. Pay growth slowed to 1.1 per cent in the three months through February, less than a third of the inflation rate. An extra public holiday in June to mark Queen Elizabeth II’s 60 years on the throne may also depress economic output in the second quarter. Very tough Osborne said the UK’s economic situation is “very tough” and the government shouldn’t waver on its fiscal plans, which are aimed at eliminating most of the deficit by 2017. “The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt,” he said in a statement. Cameron’s Conservative Party has lost public support over last month’s budget, which voters say helped the rich at the expense of pensioners and charities, and the handling of a threatened strike by tanker-truck drivers. The Labour opposition led the Tories by 41 per cent to 33 per cent in an ICM Ltd. poll published yesterday.