The latest GDP figures

This entry was posted on 10 February

The UK economy contracted unexpectedly during the fourth quarter of 2010 after activity was hampered by unusually cold weather. According to preliminary estimates from the Office for National Statistics (ONS), the economy shrank by 0.5% quarter on quarter. The economy contracted during the final three months of 2010 after growing by 0.7% during the third quarter and by 1.1% during the second quarter. On a slightly brighter note, however, this did mean the UK posted its first full year of economic growth since 2007, expanding by 1.4% during 2010.

The contraction was led by a sharp fall in activity in the construction sector, which declined by 3.3% during the quarter while in December alone, UK retail sales fell 0.8% month on month as UK shoppers found themselves thwarted by the weather. In direct contrast, the manufacturing sector actually expanded by 1.4%. Nevertheless, the ONS emphasised that, even excluding the disruption caused by the bad weather, economic growth would have been no more than “flattish”.

The shock contraction in economic growth raised fresh speculation about the possibility of a “double-dip” recession and, as the coalition government continues to administer its tough measures, triggered concerns that the economic recovery might have run out of steam. Nevertheless, these are preliminary estimates that are subject to change; indeed, the ONS explicitly warned that revision is even more likely than usual. It is therefore certain that economists are likely to closely scrutinise all forthcoming releases of economic data.

The contents of this article should not be construed as advice. Independent Financial Advice should always be attained in order to assess your own individual circumstances.