U.K. Recession Worse Than Estimated

The U.K. economy’s contraction in the fourth quarter was deeper than previously estimated as consumer spending and construction slumped the most since 1980.
TradingEconomics.com, Bloomberg 3/27/2009 5:17:04 AM

Gross domestic product fell 1.6 percent from the third quarter, exceeding the prior measurement of 1.5 percent, which was also the median forecast of 27 economists in a Bloomberg News survey. Construction dropped 4.9 percent and consumer spending declined 1 percent.

From a year earlier, the economy shrank 2 percent in the fourth quarter, the statistics office said. That compares with the previous estimate of 1.9 percent, which matched the median forecast of 25 economists.

Officials revised their measurements of manufacturing in the quarter, saying it dropped 4.9 percent instead of 5.1 percent. Services fell 0.8 percent, compared with the previous estimate of 0.9 percent. The drop in construction was more than four times as much as the earlier measurement.

Government spending rose 1.3 percent, compared with the previous estimate of 1.5 percent. Fixed investment fell 1.4 percent instead of 2.3 percent as measured in the last release, the statistics office said.

U.K. retail sales posted the smallest annual gain in more than 13 years last month, the statistics office said yesterday. Sales plunged 1.9 percent from January, four times as much as economists forecast.

Unemployment rose at the fastest pace since 1971 in February as companies were forced to lay off staff. HSBC Holdings Plc, Europe’s biggest bank by market value, said on March 25 that about 1,200 U.K. employees may lose their jobs as it responds to a challenging” environment.

Consumers still saved more money during the quarter. The household savings ratio rose to 4.8 percent, the most since the first three months of 2006, from 1.7 percent in the third quarter, the statistics office said.

The central bank has embarked on a program to spend as much as 150 billion pounds ($219 billion) to buy U.K. government debt, corporate bonds and other assets with newly created money in order to ease credit strains and encourage spending.

U.K. Recession Worse Than Estimated