(RTTNews) - UK economic growth came to a standstill in the second quarter after enjoying positive growth and low inflation for an extended period.

A report released by the Office for National Statistics or ONS on Friday showed that the real Gross Domestic Product, or GDP was flat on a sequential basis in the second quarter compared with the initial estimate of 0.2%. Economists had expected the economic growth to ease to 0.1% from first quarter’s 0.3%.

The economy expanded 1.4% year-on-year in the second quarter, the weakest since 1992. The growth rate was revised down from the preliminary estimate of 1.6%. The GDP growth was slower than the 1.5% expected by economists and 2.3% recorded in the first quarter.

In the second quarter, the implied GDP deflator rose 2.6% year-on-year, down from 3% in the previous quarter.

The slowdown in the second quarter was due to falls in the output of the production and construction industries. Production output slid 0.8% sequentially, severe than the 0.2% fall in the first quarter. Manufacturing output also declined 0.8% in the second quarter.

Following a 0.4% rise in the first quarter, construction output dropped 1.1%, which was driven primarily by private housing. Meanwhile, services output growth eased to 0.2% from 0.3% in the first quarter.

On the expenditure front, household expenditure edged down 0.1%, reversing the 1.1% growth registered in the first quarter. At the same time, government expenditure moved up 0.4% taking the annual growth to 1.9%. The statistical office said gross fixed capital formation decreased 5.3% and gross domestic expenditure showed a 0.3% drop.

According to the ONS, exports unexpectedly dropped 0.5% due to a fall in car and capital goods shipments. Meanwhile, imports declined 1.4% on lower imports of capital goods and consumer goods. Economists were looking for an increase of 0.4% in exports and 0.3% fall in imports.

In a separate communiqu�, the ONS said the service sector output growth slowed to 0.2% in three months to June from the prior three months. Economists were expecting services output growth to stay unchanged at 0.4% reported during three months ended May.

Earlier, the Bank of England had stated in its inflation report that the economy would grow just 0.1% on an annual basis in the first quarter of 2009. BoE Governor, Mervyn King said the central projection is for output to be broadly flat over the next year, so that four-quarter growth slows sharply in the near term.

Commenting on the GDP data, Raymond Van der Putten, an economist at BNP Paribas noted that the economic climate is worse than assumed by the BoE, which would persuade policy makers to soften monetary policy stance. Economists expect the BoE to ease its monetary stance in the near term by a 25 basis point cut in interest rate.

The quarterly economic forecast released by the British Chambers of Commerce, or BCC on August 18 stated that there is a distinct possibility of a technical recession in the UK. The forecast highlighted a significant worsening in economic prospects.

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