Business

UK economy shrank 0.2% revised data confirms

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Media captionJane Foley from Rabobank says "we can take a little bit of positive news" from the figures

A second official estimate of GDP has confirmed that the UK economy shrank by 0.2% in the last quarter of 2011.

The fall marked a sharp reversal in economic growth from the third quarter of 2011, when gross domestic product (GDP) expanded by 0.6%.

However, the estimate for GDP growth in 2011 as a whole was revised down from 0.9% to 0.8%, versus the previous year.

The second estimate from the Office for National Statistics (ONS) follows a "flash" estimate given in January.

The Bank of England's governor, Sir Mervyn King, has warned the economy is likely to "zig-zag" this year.

The fall in GDP was largely driven by the biggest drop in business investment for a year.

The production sector, which includes manufacturing, fell 1.4% compared with previous estimates of 1.2%.

The ONS also said that the number for the output of the service industries was unchanged, while output of the construction industry fell by 0.5%.

It said household final consumption expenditure increased by 0.5% in volume terms in the last quarter.

The ONS also said that, in current price terms, compensation of employees fell by 0.3% in the fourth quarter of 2011.

'Bounce-back'

UK economist at RBS, Ross Walker, said the figure was disappointing but he expected a return to modest growth for the first quarter of this year.

"It's a pretty poor number," he said "The main positive is that improvements [in survey data] that look increasingly broad-based have not been captured, and we will get a bounce back in Q1 [the first three months of 2012].

"I don't think it will be a spectacular Q1 but I think we will squeeze some growth out of it."

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said he thought the first three months of this year would show some economic growth, making it more likely the UK would avoid recession

"Recent survey data suggests that the chances of a second successive decline in GDP - a technical recession - have receded," he said.

"However, even if that figure does prove to be positive, any recovery thereafter is likely to be slow and patchy."