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Economy shrinks less than thought UK economic revision disappoints
(about 1 hour later)
The UK economy did not contract as much as originally estimated in the July to September period, figures show. The UK economy shrank by 0.2% between July and September, figures show, an upward revision to the previous estimate of a 0.3% contraction.
The economy shrank by 0.2% in the third quarter. That compares with an earlier estimate of a 0.3% contraction. However, the news disappointed some analysts who had been predicting a contraction of 0.1%.
However, the revision was not as big as had been expected by analysts, who had forecast a contraction of 0.1%. "We still find it hard to believe fully that the economy was contracting in the third quarter" said Philip Shaw, economist at Investec.
The UK economy has been shrinking for six consecutive quarters and is lagging behind other countries, many of whom have already pulled out of recession. The UK economy has shrunk for six consecutive quarters.
Since the recession began in the March-to-May period in 2008, the economy has contracted by 6.0%. Since the recession began in the March-to-May period in 2008, the UK's economy has contracted by 6.0%.
Recovery concern
The British Chambers of Commerce (BCC) said the latest figures raised concerns about the strength of the recovery.
BCC chief economist David Kern said: "While most analysts expect a return to positive growth in the next few months it is important to stress that recovery is not yet guaranteed."
The first GDP estimate for the third quarter had shown a contraction of 0.4%, but this has been revised twice, first to a 0.3% contraction and now to -0.2%.
However, the fact the economy had shrunk during the third quarter of 2009 took many analysts by surprise when the initial figures were released.
Many had expected the UK economy to return to growth during that period, and some still believe that they may yet be proven right.
"We are expecting this number to be revised upwards and this will eventually be seen as a growth quarter", said Amit Kara from UBS. "The big picture is that the economy is recovering... we see growth at 1.8% next year."
The Office for National Statistics said the upward revision to the third-quarter figures was down to an improvement in construction output. That was boosted by strong growth in public sector projects, while the decline in house building slowed.The Office for National Statistics said the upward revision to the third-quarter figures was down to an improvement in construction output. That was boosted by strong growth in public sector projects, while the decline in house building slowed.
However, services and industrial production were weaker.However, services and industrial production were weaker.
BBC economics editor Stephanie Flanders said: "There is at least one piece of encouraging news in today's release: the household savings ratio in the third quarter rose to 8.7% of income, compared to 7.6% in the previous three months."
In his pre-Budget report, Chancellor Alistair Darling predicted the UK would exit recession in the fourth quarter of 2009.In his pre-Budget report, Chancellor Alistair Darling predicted the UK would exit recession in the fourth quarter of 2009.