ONS: UK output fell even faster than expected

 
Tim Wallace
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ECONOMIC output fell more quickly towards the end of last year than first thought, official estimates showed yesterday.

GDP contracted by 0.3 per cent in the final quarter of last year, the Office for National Statistics (ONS) said, not the 0.2 per cent previously reported.

The decline represents a sharp turnaround from the 0.6 per cent in the previous quarter and takes annual growth to 0.7 per cent, down from the 0.8 per cent previously estimated.

Household consumption growth slowed to 0.4 per cent in the quarter, from earlier estimates of 0.5 per cent, while real disposable incomes fell 0.2 per cent in the quarter, bigger than the 0.1 per cent fall in the third quarter as inflation continued to run above wage growth.

Manufacturing led the decline with a 0.7 per cent fall in output, followed by construction at 0.2 per cent and services at 0.1 per cent.

However, economists pointed to a rising savings rate as evidence consumers were repairing their balance sheets in the quarter, which could lead to greater growth in the future.

Savings were revised up by £10bn for the first three quarters of the year to a rate of 8.3 per cent of gross disposable income, despite low interest rates.

This means “there would appear to be greater scope over coming quarters for a lower household savings rate to support consumer demand,” according to economist Jamie Dannhauser from Lombard Street Research.

ONS data also showed an improvement in the UK’s trade deficit, which fell from £4.3bn in the third quarter to £4bn in the fourth, led by goods exports rising four per cent, outstripping the one per cent rise in imports.