GDP grows by 0.3pc

A stronger services sector and higher industrial production levels boosted economic growth to 0.3 per cent in the fourth quarter of 2009.

The second GDP estimate from the Office of National Statistics revises the initial figure up by 0.2 percentage points from 0.1 per cent.

However, this shows that while some sectors of the economy were finding their feet, others were still struggling.

Service sector growth in the fourth quarter was revised up to 0.5 per cent quarter-on-quarter with industrial production also getting a substantial lift to 0.4 per cent. In contrast, construction output was revised down markedly to show contraction of 1.0 per cent.

]Exports saw healthy growth of 3.7 per cent, helped by the weak pound and improved global economic activity and trade. However, imports rose by an even sharper 4.1 per cent, undoubtedly lifted by car imports, meaning that net trade was actually modestly negative.

Furthermore economists pointed out that while the quarterly gain in GDP was revised up more sharply than expected, it is still below initial forecasts of 0.4% growth.

With the third quarter figures revised down, the annual rate of contraction was pushed to 3.3 per cent from 3.2 per cent.

Economists warn that the UK’s fledgling recovery is coming under pressure with muted consumer spending, rising unemployment, low earnings growth, January VAT hike and cautious outlooks from businesses posing a very danger to its progress.

The faltering economic recovery in the eurozone is also causing concern over a prospective pick-up in UK exports.

Jonathan Loynes, chief European economist at Capital Economics, says: “The return to positive growth was driven primarily by a slowdown in the rate of inventory unwinding – hardly the basis of a strong recovery.

“Overall, the upward revision is welcome, but does not alter the picture of a very fragile recovery. We still expect GDP growth of only about 1% in 2010.”

Howard Archer, chief UK and European economist at IHS Global Insight says: “It is far too soon to call the economic all-clear as serious economic and financial obstacles remain in the way of sustainable, decent growth. Consequently, we suspect that recovery will be gradual and prone to relapses.

“Indeed, the significant weather-related hit to a still very fragile economy at the start of 2010 means that there is a very real danger that the economy could suffer renewed contraction in the first quarter.”

The UK was the last of the major economies to emerge from recession after contracting for six consecutive quarters.