UK economy limps out of recession

THE UK has officially come out of recession – but only just.

Data released by the Official of National Statistics showed the economy grew just 0.1 per cent during the fourth quarter of 2009.

Although the figure compares with a decrease of 0.2 per cent in the third quarter of 2009 it still comes way below analysts expectations of 0.4 per cent growth during the three months ending December 2009.

Jonathan Loynes, chief European economist at Capital Economics, said hope of that the UK economy had emerged decisively from recession in Q4 had been dealt a major blow.

He said: "We thought that the risks to the median forecast of a 0.4 per cent gain in GDP were on the downside, but the 0.1 per cent increase is a big blow."

Loynes said the disappointment came mainly in the services sector, which grew by just 0.1% rather than the 0.5-0.6 per cent rise suggested by the business surveys.

Transport, storage and communication were among the sectors showing zero growth, while government and other services rose 0.2 per cent, compared with a decline of 0.2 per cent in the previous quarter.

Construction output also showed zero growth in the fourth quarter, compared with an increase of 1.9 per cent in the previous quarter.

Loynes said: "With household incomes under pressure, credit in short supply and a major fiscal squeeze looming, the path to a full recovery is going to be a long and bumpy one.

“We still expect average GDP growth of a below-consensus 1.0 per cent or so in 2010. Further monetary policy support may be back on the agenda."

Howard Archer, chief European and UK economist at IHS Global Insight, claimed the rise was good, but worrying news.

"Growth was marginal; and, while the UK may be officially out of recession, it is far from out of the economic woods! Economic and financial conditions are still very challenging and the UK faces a tough job to build decent recovery. We suspect GDP growth will be limited to 1.0 per cent in 2010."