UK GDP figures show smaller fall

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Media captionONS chief economist Joe Grice: "Recovery is still delicate"

The UK economy shrank by less than previously thought in the last three months of 2010, revised figures show.

Gross domestic product (GDP) slipped by 0.5% in the period, according to fresh data from the Office for National Statistics (ONS).

A previous revision by the ONS said GDP had fallen 0.6% in the quarter.

Separate ONS figures showed a worsening in the UK's trade balance with the rest of the world, with a deficit of almost £27bn in the final quarter of 2010.

The figure was the biggest since the second quarter of 2009. The £10.5bn deficit in physical goods was the largest since records began in 1955.

A trade deficit occurs when a country imports more than it exports.

Upward revisions

The latest GDP figures from the ONS said that output from production industries, which include manufacturing and mining, had been higher than previously estimated.

Its initial estimate for the quarter suggested that the economy had contracted by 0.5% - with heavy snow blamed for the slump.

The ONS said the snow still accounted for the contraction - without it, growth would have been flat.

The 0.5% fall is the largest quarterly contraction since the second quarter of 2009.

The annual rate of growth was unrevised at 1.5% in the latest estimate.

Output from construction industries was revised up, to a contraction of 2.3% from the previous estimate of a 2.5% contraction. Service sector output was also revised up to a 0.6% contraction from a 0.7% contraction.

Household expenditure fell by 0.3% during the quarter, while government expenditure rose by 0.4%, the ONS said.

'Dire reading'

Analysts said the small upward revision to the GDP data did little to change the economic outlook for the UK.

However, some highlighted the relative weakness of the UK's economy compared with its rivals.

"The decline [in growth] overstates the weakness in the economy, reflecting the bad weather at the end of last year, but is nevertheless still a dire reading compared to the UK's peers," said Chris Williamson at Markit.

Most analysts still expect limp growth in the UK in the current quarter.

"The underlying economic picture is weak," said Hetal Mehta at Daiwa Securities.

"Though economic activity appears to have rebounded in January, there are signs of a marked slowdown since. We expect growth in [the first quarter] to be weak at just 0.4%."

GDP figures for a particular quarter are produced first as a so-called "flash" estimate, and are later revised at least twice as more detailed information is collated.

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