–Q4 2nd Revision GDP -0.3% q/q; +0.5% y/y

LONDON (MNI) – UK economic growth was revised lower in the final
quarter of 2011, as services output fell for the first time in a year,
figures released by National Statistics showed Wednesday.

While the figures are backward looking, they show growth running
further below where the Bank of England thought it would be, and will
raise further concerns about how robust the economic recovery is.

GDP was revised down to show a fall of 0.3% on the quarter and
an increase of 0.5% on the year, compared with the previous estimate for
a quarterly fall of 0.2% and annual rise of 0.7%. Analysts had expected
there to be no revision to the data.

Forecasts from the February inflation report suggested the Bank of
England thought GDP fell 0.1% in Q4 before rising to 0.5% in Q1 2012
according to Market News’ calculations. Recent weaker economic data
suggests that the Q1 forecast may be looking a little optimistic.

The main reason for the lower GDP figures, was a downward revision
to services output which was revised down to show a fall of 0.1% on the
quarter against the earlier estimate of unchanged. This was the first
fall since Q4 2010.

On an expenditure basis there were large revisions which changed
the growth breakdown in Q4. Household spending was revised down slightly
to show a rise of 0.4% in Q4 from the initially estimated 0.5%. But
investment (gross fixed capital formation) was revised up sharply to
show a fall of 0.6% in contrast to the initially estimated 2.8% fall.

The upshot was a downward revision to net exports which now added
just 0.2 percentage point to quarterly growth against the previously
estimated 0.6 percentage point.

Inventories cut 0.8 percentage point from quarterly GDP growth.

Real household disposable income fell 0.2% on the quarter and by
0.3% on the year. The 2011 fall was 1.2% compared with 2010, the largest
decline since 1977 showing clearly just how much households have been
squeezed in 2011.

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

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