UK's exit from recession bolstered by revised figures

26 February 2010

The UK's emergence from recession at the end of last year was stronger than previously estimated, new figures show.

The latest GDP statistics - which indicate the health of the economy - show a stronger services sector and higher industrial production levels boosted economic growth to 0.3% in the fourth quarter of 2009.

Previously, the Office of National Statistics reported that the economy exited the recession on the back of 0.1% economic growth. This followed six consecutive quarters of economic contraction and a 6% drop in economic output. 

However, the latest figures show that while some sectors of the economy were finding their feet at the end of last year, others were still struggling.

Service sector growth in the fourth quarter was revised up to 0.5% quarter-on-quarter with industrial production also getting a substantial lift to 0.4%. In contrast, construction output was revised down markedly to show a contraction of 1%.

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


Furthermore, economists point 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% from 3.2%.

The UK’s fledgling recovery is still under considerable pressure with muted consumer spending, rising unemployment, low earnings growth, January's VAT hike and a cautious outlook from businesses all 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.”

And Howard Archer, chief UK and European economist at IHS Global Insight, adds: “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."

He warns that the 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," Archer adds.

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