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GDP shock with Q4 fall

UK output fell by 0.5 per cent in the fourth quarter of 2010 and grew less than expected in the third quarter, according to the Office for National Statistics.

The ONS revised economic growth in the third quarter down from 0.8 per cent to 0.7 per cent while publishing the fourth-quarter figures, which are much worse than anticipated.

Output in the production and service industries was revised down to 0.5 per cent in Q4. Construction output was revised down to 3.9 per cent from 4 per cent.

Manufacturing was up 1.1 per cent but mining was down 1.7 per cent and utilities were down 0.5 per cent. Inventories rose £300m in the quarter. The trade deficit in real terms remained at £9.7bn at the end of last year. Exports rose 1.5 per cent while imports rose 1.7 per cent.

Schroders European economist Azad Zangana says: “These are a disappointing set of numbers and should dash any threat of a rise in interest rates in the near future. With one negative quarter, should the economy contract over the first three months of 2011, then the UK would head back into a technical recession, something the UK has been very prone to in the past.”

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