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The UK Economic Growth Shrank More than Expected

In The News

The Guardian reports today that the UK GDP fell 0.3% in the fourth quarter rather than the 0.2% contraction previously predicted by economists. It states that none of the analysts polled by Reuters had predicted the downgrade. Overall the economy grew 0.7% in 2011.

The Guardian furnished the accounts of the well known economists such as Vicky Redwood, the Chief UK Economist at Capital Economics. Here is what he says.

The slight downward revision to GDP in Q4 is disappointing, although of course this is fairly old news now and it looks as though the economy recovered somewhat in the first quarter … At least there were some encouraging aspects to the detail. Although the household saving rate nudged down in Q4, the back-data have been revised up a fair bit. So it now looks like households' finances are in a bit better condition than before. What's more, the balance of payments figures show that the current account deficit fell sharply, reflecting both the drop in the trade deficit and a rise in the investment income surplus. Meanwhile, it looks as though the economy has managed to expand in Q1. Nonetheless, we still think that there are a number of reasons to doubt that the recovery can maintain the recent acceleration.

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