The economy shrank at its fastest pace since 1980 in the last three months of 2008, unrevised official figures confirmed on Wednesday, as households cut spending at the sharpest rate since 1991.
The Office for National Statistics said its second estimate of final-quarter GDP showed a contraction of 1.5% in the last three months of the year. The annual rate was revised down by 0.1 percentage points to a fall of 1.9%.
Analysts had expected a slight downward revision of the quarterly rate, but the ONS left this unchanged, but it did cut its estimate for Q3 activity to a fall of 0.7% from a previously reported 0.6% drop. The figures confirm the country entered a steep recession at the end of last year and are unlikely to alter expectations that the Bank of England will take further steps to ease monetary conditions.
With interest rates nearing zero, the Bank is moving towards buying assets with newly-created money to try and boost demand. “The economy remains in deep recession. In Q1 we expect a contraction of similar magnitude to that seen in Q4,” said Adam Chester, an economist at HBOS. “Consumer and business surveys point to ongoing weakness to the end of 2009.”
British households cut expenditure by 0.7% in the Q4, the largest drop since the Q2 of 1991. Manufacturing and production output figures were revised down sharply, to show the biggest falls for both since 1974, when the government imposed a three-day working week because of energy shortages.
However, output estimates for the more dominant services sector were revised up slightly. The International Monetary Fund expects Britain to be the worst-performing big economy this year, as its economic decline gathers pace. The United States, Japan and Germany all suffered bigger falls in GDP at the end of last year. (Reuters)