UK GDP surprises on the downside for quarter four - UPDATE

Date: Wednesday 25 Jan 2012

Gross domestic product (GDP) growth in the United Kingdom contracted at an 0.2% quarterly rate in the fourth quarter, according to the latest data out this morning from the Office for National Statistics (ONS).

The consensus estimate was for a fall of 0.1% in quarter-on-quarter growth.

The tally for the previous quarter was left unchanged, at 0.6% on the quarter.

By sectors of activity, output in construction rose by 0.5% (Previous: 0.3%), remained flat in services (Previous: 0.7%) and fell by 1.2% in the production industries.

In parallel, ONS has also reported this morning that service sector activity only rose by 0.1% on the quarter in the three months to November (Consensus: 0.4%).

Commenting on today's data Blerina Uruci, at Barclays Capital, is writing to clients saying that,"there are two important aspects to the news in Q4 GDP. First, the weakness came mainly from industrial production and construction output, which are very volatile, and we might expect to see some of this weakness unwound in Q1. Second, survey indicators suggest that the latest spell of weakness in the economy has troughed and we should expect growth to slowly improve from here.

"While a technical recession cannot be ruled out, the signs are that the economy is turning the corner slowly and there is little evidence to support predictions of a deep recession. In fact, we forecast the economy to grow marginally by 0.1% q/q in Q1 and to continue to improve thereafter. Nevertheless, with the euro crisis grinding on, the near-term economic outlook remains precarious."

AB

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