United Kingdom: Fourth quarter GDP revised downwards
February 25, 2011
In the final quarter, GDP contracted a seasonally adjusted 0.6% over the previous quarter, according to the second estimate released on 25 February. The reading represented a downward revision to the 0.5% contraction released in the first estimate, as well as a sharp deterioration compared to the 0.7% expansion tallied in Q3. Based on the more complete data set, GDP grew 1.5% year-on-year in Q4, down from the 2.7% increase observed in Q3. The ONS maintained that the dismal performance reflected adverse weather conditions, which, if excluded, would have seen a ?flattish? reading. The contraction was the result of deteriorating domestic and external sides of the economy. Private consumption declined 0.1% and fixed investment posted a 2.5% contraction, partly offset by a 0.7% expansion in government consumption. On the external side, exports continued to recover (Q4: +2.3% quarter-on-quarter) but were outpaced by imports (Q4: +3.0% qoq), which further widened the trade deficit. As a result, the net contribution of the external sector to overall growth deteriorated. At the sector level, the downward revision was most notably driven by a 0.2 percentage-point downward revision of growth in both the industrial and services sectors. As a result, the industrial sector grew 0.7%, which contrasted the 0.7% decline in the services sector. The construction sector was revised up to a 2.5% contraction from the 3.3% decline published in the first estimate. Going forward, the panel is optimistic that the economy continues to recover part of the lost ground in the coming quarter, boosted by the execution of delayed production and consumption as the weather improves.