The UK’s output fell 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 latest fourth quarter figures, which are much worse than anticipated.
The figures are likely to encourage those who want the Bank of England to keep interest rates on hold so as not to damage UK’s growth prospects, despite the recent high inflation.
Output in the production and service industries was revised down to 0.5 per cent respectively in the latest quarter. Construction output was also 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 on the quarter. UK’s trade deficit in real terms remained at £9.7 billion at the end of last year. Exports of goods and services rose 1.5 per cent. 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 being recorded, 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.”