According to data released on 29 March, the contraction tallied in the fourth quarter was somewhat less severe than previously estimated. However, the numbers still point to a moderation in economic activity even when the impact of adverse weather on the economy is taken into account. In the fourth quarter, GDP contracted 0.5% over the previous quarter in seasonally adjusted terms, which matched the first estimate and thus corrected the second estimate's downward revision (-0.6% quarter-on-quarter). The ONS maintained that the dismal performance reflected December's adverse weather conditions, which were estimated to ?have had a negative contribution to growth of approximately 0.5 percentage points?. However, even when discounting the effects of the weather, the economy would have recorded a flat reading, which is still well below the 0.7% quarterly increase observed in the third quarter. That said, the slowdown over the previous quarter was the result of weaker growth in both, domestic and external fronts. Private consumption decreased 0.3% (previously reported: -0.1% qoq), which was only partly offset by a 0.4% increase in government spending (previously reported: +0.7% qoq). In addition, fixed investment recorded a 1.8% contraction (previously reported: -2.5% qoq). On the external side, exports increased 1.7% (previously reported: +0.7% qoq), while imports grew 3.2% (previously reported: +3.0% qoq), further widening the trade deficit. As a result, the net contribution of the external sector to overall growth deteriorated from minus 0.1 percentage points in the third quarter to minus 0.5 percentage points in the fourth. At the sector level, the most notable revision to the second estimate was observed in the construction sector, which dropped a less severe 2.3% over the previous quarter (previously reported: -3.3% qoq). Services also dropped, contracting 0.6% (previously reported: +0.5% qoq). In contrast, the industrial sector grew 0.8% (previously reported: +0.9% qoq), while agricultural output increased 0.1% (previously reported: +0.3% qoq). Temporary disruptions caused by adverse weather and other momentary factors usually translate into stronger growth in the following quarter, as business, particularly relevant in the construction sector, compensate for delayed production in the following months.
Fourth quarter contraction contracts 0.5% matching initial estimate
March 29, 2011
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