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UK revised data shows worse contraction in fourth quarter
27 Mar 2009UK revised data shows worse contraction in fourth quarter
Britain's economy slowed more sharply than previously thought in the last three months of 2008 as construction output plunged and firms ran down stocks, revised official data showed today.
The Office for National Statistics' final GDP data showed the economy shrank by 1.6 percent in the fourth quarter, the sharpest decline since 1980. Analysts had expected a reading of -1.5%, unchanged from the preliminary figure.
The annual rate of decline was revised down to 2.0%, the sharpest fall since 1991.
The pound slipped after the figures, which reinforced fears that Britain would be one of the economies hardest hit by the global downturn.
"The GDP contraction was depressingly even greater than previously thought," said Howard Archer, economist at IHS Global Insight.
The ONS said a huge downward revision to construction output was the main reason for the revision. Construction output fell 4.9% in the quarter, the biggest quarterly fall since Q4 1980.
The Bank of England has cut interest rates to 0.5% and started pumping money into the economy to ward off a prolonged recession. Its chief economist Spencer Dale said the risks to growth were weighted to the downside.
The household saving ratio jumped to 4.8% between October and December, the highest since the start of 2006, from 1.7% in the previous quarter.
"Households have been helped by the cuts in interest rates and are reluctant to spend because of the economic climate," said Philip Shaw, economist at Investec.
There was also evidence that firms ran down inventories even more aggressively that previously thought - by more than £4 billion after a build-up of £1 billion in Q3.
While this may have contributed to the downward revision to Q4 GDP, it bodes well for the outlook as firms will have to raise output more quickly when the recovery comes.
Separate figures showed Britain's current account deficit narrowed to £7.641 billion in the fourth quarter of 2008 from an upwardly revised deficit of £8.162 billion in Q3.
