Tags: UK | Economy | Shrank | Less | Thought

UK Economy Shrank Less Than Thought

Tuesday, 29 Mar 2011 01:37 PM

Britain's economy shrank by half a percent in the last quarter of 2010, not quite as bad as previously thought, official statisticians said Tuesday, though their final figure did little to ease apprehension about the course of the recovery.

The estimate by the Office for National Statistics was a bit better than the 0.6 percent drop reported previously, but analysts detected worrying trends within the data.

"The only positive growth came from government spending and that is now in the process of being reversed," said Howard Archer, chief European economist at IHS Global Insight.

"Consumer spending contracted, business investment stagnated ... and net trade was negative as imports rose more than exports," Archer said.

The ONS said it revised the figure because it now believes that underlying growth in the quarter was flat, and that the decline was due to severe winter weather in December. The previous estimate assumed that underlying growth declined by 0.1 percent during the month.

"The underlying picture — of flat output — is still very weak," said Vicky Redwood, senior U.K. economist at Capital Economics.

"What's more, revisions to the composition of output mean that stock building is now estimated to have supported growth to a bigger extent than previously thought. Offsetting this are downward revisions to consumer spending, government spending and net trade," Redwood said.

The government last week revised its forecast for GDP growth downward to 1.7 percent for 2011, compared with the 2.1 percent it expected in November. The OECD predicts growth in Britain will be 1.5 percent this year.

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Britain's economy shrank by half a percent in the last quarter of 2010, not quite as bad as previously thought, official statisticians said Tuesday, though their final figure did little to ease apprehension about the course of the recovery. The estimate by the Office for...
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