–Adds detail to version transmitted 0930GMT
–Q4 2nd Estimate GDP -0.2% q/q; +0.7% y/y

LONDON (MNI) – Household spending rose for the first time in over a
year in the fourth quarter and net exports boosted growth, but these
were offset by a large fall in investment spending, figures from
National Statistics showed Friday.

The second estimate of GDP had growth unrevised to show a fall of
0.2% on the quarter and an increase of 0.7% on the year, a small
downward revision from the previously estimate 0.8% annual increase.

While there was a downward revision to Q3 growth of 0.1 percentage
point to 0.5% on the quarter, the figures were broadly in line with
analysts’ median forecast and unlikely to alter expectations for
monetary policy.

Forecasts from the February Bank of England Inflation Report were
for GDP to fall 0.12% on the quarter in Q4 before rising 0.24% in Q1
2010, according to calculations by Market News International. The Bank
of England publishes its own series of ‘true’ GDP data as it doesn’t
fully trust the early estimates of GDP from the NS.

The BOE forecasts were for GDP to rise 1.2% in 2011, whereas growth
came in at 0.8%, although this latter figure included downward revisions
earlier in 2011 which the BOE has not factored in.

The output components of GDP were broadly unrevised but the new
data on the spending side of the economy showed household spending rose
0.5% on the quarter in Q4, the first rise since Q2 2010, adding 0.3
percentage point to GDP on the quarter.

The rise in household expenditure is a potential sign that having
faced one of the toughest squeezes of income on record, consumers may
have finally adjusted to the downturn and are now starting to see
finances improve.

The largest addition, though, to growth came from net exports which
added 0.6 percentage point to quarterly growth, the largest since Q1
2011. Exports added 0.7 percentage point to growth, the largest since Q4
2010. The latest addition will add to hopes that the economy is starting
to rebalance, although the net export data can be erratic and subject to
revision.

Goverment spending also added to GDP rising 1% on the quarter,
adding 0.2 percentage point to growth.

In spite of the positive contributions from these areas, a massive
fall in investment spending and a negative contribution from inventories
meant that overall growth on the quarter was negative.

Gross fixed capital formation fell 2.8% on the quarter, the largest
decline since Q2 2010 knocking 0.4 percentage point from GDP.

Inventories cut GDP growth by around 0.5 percentage point, and an
even large figure of around 0.75 percentage point once the quarterly
alignment adjustment, which goes through inventories, is taken into
account.

At the time of the publication of the Inflation Report on February
15, Governor of the Bank of England, Mervyg King, said “For much of this
year, there is likely to be a ‘zig-zag’ pattern of alternating positive
and negative quarterly growth rates reflecting the additional Bank
Holiday for the Queen’s Diamon Jubilee, so that it will be harder than
usual to interpres the official estimates of growth.”

The BOE forecasts actually show growth falling to 0.03% on the
quarter in Q2 and then rising to 0.55% and 0.54% in Q3 and Q4
respectively.

–London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: MABDS$,M$B$$$,MT$$$$]