U.K. GDP Grows at Faster-Than-Estimated Pace in Fourth Quarter


The U.K. economy emerged from recession in the fourth quarter at a faster pace than previously estimated, handing a boost for Prime Minister Gordon Brown with a general election weeks away.

Gross domestic product rose 0.4 percent from the third quarter, compared with a previous calculation of 0.3 percent, the Office for National Statistics said.

GDP was 3.1 percent lower in the fourth quarter than a year earlier, compared with a previous estimate of 3.3 percent Output shrank by 6.2 percent since the first quarter of 2008, making the recession the longest and deepest on record.

The upward revision came as output of services, construction and agriculture were revised slightly” higher, the statistics office said.

Gross capital formation contributed 0.3 percentage point to growth, with government and household spending each providing 0.2 point.

With the pound losing a quarter of its trade-weighted value over the past three years, officials expect exports and investment to drive the recovery as households and the government repair balance sheets.

The savings ratio, which measures the proportion of income hoarded by households, fell to 7 percent in the fourth quarter from an 11-year high of 8.4 percent in the third, the statistics office said. It was the first decline in the rate since the third quarter of 2008. Real household disposable income fell 1 percent.

Recent data have called into doubt the recovery as credit strains persist. A Confederation of British Industry index of retail sales dropped in March, while the Bank of England said yesterday that mortgage approvals unexpectedly fell to a nine- month low in February.

The current account deficit narrowed to 1.7 billion pounds in the fourth quarter, or 0.5 percent of GDP, the smallest since the first quarter of 2008, the statistics office said in a separate report. The gap was 5.9 billion pounds in the third quarter. A fourth-quarter deficit of 5.1 billion was predicted in a Bloomberg survey.

The deficit in goods and services was offset by a doubling of the investment-income surplus to 10.5 billion pounds, the figures showed.

Brown is counting on an economic revival to deny the Conservative opposition a majority in the election due by June. The Conservatives’ lead over the Labour government has narrowed as ministers argue that the opposition’s plans to start cutting spending this year would plunge Britain back into recession.


TradingEconomics.com, Bloomberg
3/30/2010 11:05:24 AM