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UK GDP figure revised down further | UK GDP figure revised down further |
(40 minutes later) | |
The UK economy shrank by more than previously thought during the last three months of 2010, revised figures show. | The UK economy shrank by more than previously thought during the last three months of 2010, revised figures show. |
Gross domestic product (GDP) slipped by 0.6% in the period, according to fresh data from the Office for National Statistics (ONS). | Gross domestic product (GDP) slipped by 0.6% in the period, according to fresh data from the Office for National Statistics (ONS). |
Its initial estimate had suggested the economy had contracted by 0.5% - with heavy snow blamed for the slump. | Its initial estimate had suggested the economy had contracted by 0.5% - with heavy snow blamed for the slump. |
However the ONS said that the revision was not a dramatic one. | However the ONS said that the revision was not a dramatic one. |
"It's not that much of a shock, this is a very small revision," the organisation's chief economist Joe Grice told BBC News. | "It's not that much of a shock, this is a very small revision," the organisation's chief economist Joe Grice told BBC News. |
"The snow effect we think is still 0.5%. On the basis of that, the economy is still flattish at minus 0.1%. The overall picture is still a flattish underlying economy in the fourth quarter." | "The snow effect we think is still 0.5%. On the basis of that, the economy is still flattish at minus 0.1%. The overall picture is still a flattish underlying economy in the fourth quarter." |
The ONS statement added that manufacturing appeared to have done quite well, but that the construction industry was weak. The services sector, which accounts for a large percentage of the economy, contracted. | The ONS statement added that manufacturing appeared to have done quite well, but that the construction industry was weak. The services sector, which accounts for a large percentage of the economy, contracted. |
GDP figures for a particular quarter are produced first as a so-called "flash" estimate, and are later revised at least twice as more detailed information is collated. | |
'Disappointing' | 'Disappointing' |
Labour has criticised the the introduction of a VAT rise and the government's plans to dramatically cut public spending while the recovery remains fragile. | Labour has criticised the the introduction of a VAT rise and the government's plans to dramatically cut public spending while the recovery remains fragile. |
But a Treasury spokesman said it stood by its position. | But a Treasury spokesman said it stood by its position. |
"The chancellor said that the fourth-quarter growth figures were disappointing and today's revision doesn't change that fact. | "The chancellor said that the fourth-quarter growth figures were disappointing and today's revision doesn't change that fact. |
"It also doesn't change the need to deal with the nation's credit card - the country is borrowing more this year than is spent on the entire NHS. | "It also doesn't change the need to deal with the nation's credit card - the country is borrowing more this year than is spent on the entire NHS. |
"What's more, the survey data so far this year has exceeded expectations." | "What's more, the survey data so far this year has exceeded expectations." |
The BBC's economics editor, Stephanie Flanders, said: "Those looking for bad news in these figures (and that is usually everyone) might do better looking beyond the first page, to the trade and investment tables towards the back. | The BBC's economics editor, Stephanie Flanders, said: "Those looking for bad news in these figures (and that is usually everyone) might do better looking beyond the first page, to the trade and investment tables towards the back. |
"Investment was 2.5% down on the previous quarter, and was a key factor in the slowdown." | "Investment was 2.5% down on the previous quarter, and was a key factor in the slowdown." |
Interest rates | Interest rates |
She added that net trade, once again, made a negative contribution to the recovery - exports growing 2.3%, but imports up 3%. | She added that net trade, once again, made a negative contribution to the recovery - exports growing 2.3%, but imports up 3%. |
Howard Archer, chief UK and European economist at IHS Global Insight, took a gloomy view, calling the figure "a hugely disappointing set of data". | |
Documents from the Bank of England's rate-setters, released on Wednesday, had hinted that those who had opposed a hike in rates this month would consider a change in stance if the UK's GDP figures had suggested the economy had picked up. | |
Equally, as Vicky Redwood, an analyst Capital Economics, said, figures showing a worsening economics performance may cause a change of heart among those previously in favour of raising rates. | |
"The slight downward revision might give the more hawkishly inclined members of the MPC reason to pause for thought," she said. | |
Three of the bank's policymakers voted for a rate rise at the last meeting, with the remaining six Monetary Policy Committee (MPC) members voting to keep rates at historic 0.5% lows. | |
Minutes from the MPC's last meeting stressed that recoveries from recession were rarely smooth, so more weakness would not be unusual - but it also said growth could pick up in the first quarter if the level of activity returned to normal after the snow, helped along by postponed expenditure. | |
The MPC will be watching closely to see how the economy has been performing so far this year, without the influence of severe weather. | |
Worries are growing about the recent pick-up in inflation, boosted by rising commodity prices and the VAT increase. | Worries are growing about the recent pick-up in inflation, boosted by rising commodity prices and the VAT increase. |