"But given what's happening in the world we need a relentless focus on the economy and recent announcements on infrastructure and lending show that's exactly what we're doing."
This morning the Government announced a much-delayed deal for new intercity express trains. It awarded a £4.5bn contract to Hitachi to build 92 intercity trains at a newly-built factory in northern England which will create more than 900 jobs.
Peter Dixon, economist at Commerzbank, said: "Terrible data. Frankly there's nothing good that comes out of these numbers at all ... The economy looks to be badly holed below the water line at this stage. It's a far worse period of activity than we'd expected."
Howard Archer at IHS Global Insight called the data a "very nasty surprise". He said plunging construction and manufacturing output weighed heavily on the economy, while the dominant service sector activity also contracted marginally.
Construction shrank 5.2pc - the largest drop since the first quarter of 2009. Services output contracted 0.1pc.
"The steep contraction ... heaps further pressure on the government to come up with more measures to boost growth, and will undoubtedly lead to further calls for the fiscal squeeze to be eased until the economy is on a firmer footing," he said.
"It also fuels speculation that the Bank of England will have to announce more stimulative measures this year."
He expects UK GDP to contract by around 0.5pc overall in 2012.
The work lost as a result of the extra day given for the Queen’s Diamond Jubilee celebrations in June was a significant drag during the quarter.
Last week the IMF warned in a report that the Britain’s recovery had stalled and the Government must be prepared to introduce a 'Plan B' to pump life into the ailing economy.
Sterling hit its lowest in nearly two weeks against the dollar of $1.5470 after the GDP data. The FTSE 100 was trading flat.
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