–Q4 Preliminary GDP -0.2% q/q; +0.8% y/y

LONDON (MNI) – Economic output fell by more than expected in the
fourth quarter increasing the likelihood that the UK will fall back into
recession, figures from National Statistics revealed Wednesday.

The data, along with dovish comments from Bank of England Governor
King yesterday, are likely to fuel speculation that the central bank
could conduct further Quantitative Easing at the February Monetary
Policy Committee meeting.

GDP fell 0.2% on the quarter in Q4 and was up 0.8% on the year, the
first quarterly decline since Q4 2010. Analysts had expected a smaller
drop of 0.1% on the quarter and increase of 0.8% on the year.

The disappointing outturn was also below the November BOE forecast
which was for GDP to remain unchanged on the quarter. If the BOE’s
forecast for Q1 2012 for a 0.1% quarterly decline is realised then the
UK will be thrown back into a technician recession usually seen as two
quarters of negative growth, not seen this Q2 2009.

BOE Governor King said last night, “With inflation falling back and
wage growth subdued, there is scope for interest rates to remain low,
and, if necessary, for further asset purchases, to prevent inflation
falling below the 2% target”.

Services output, which makes up 76% of GDP, was flat on the
quarter, following a rise of 0.7% in Q3. Within services, there was a
0.5% fall in distribution, hotels and restaurants. Transport, storage
and communication was down 0.1% on the quarter.

Business services and finance output was flat with the only
category posting a rise being government and other services where output
rose 0.4% between Q3 and Q4.

A sharp fall in industrial production of 1.2% on the quarter in Q4
had a significant negative impact on GDP. Part of this fall was due to
the warm weather which hit output of electricity and gas, although
manufacturing was also down 0.9% on the quarter pointing to deeper
underlying problems.

Construction output fell 0.5% on the quarter while agricultural
output was up 0.1%, both having a limited impact on Q4 GDP growth.

Excluding oil and gas extraction GDP was also down 0.2% on the
quarter but was up 1.1% on the year.

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

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