Page last updated at 11:19 GMT, Tuesday, 30 March 2010 12:19 UK

UK economic growth unexpectedly revised up to 0.4%

WHAT IS GDP?
Building site
Gross domestic product
A measure of a country's economic activity, namely of all the services and goods produced in a year
The first estimate of GDP, issued every three months, is followed by at least two revisions

The UK economy emerged from recession in the fourth quarter of last year at a faster pace than previously estimated, official figures have shown.

Data from the Office for National Statistics said the economy grew 0.4% between October and December in 2009.

This was faster than the previous estimate of 0.3% growth during the quarter.

The ONS said the upward revision was due to higher output from business services, construction and agriculture.

For the year 2009 as a whole, GDP contracted by 4.9%, the ONS said. The previous estimate had been for a contraction of 5% over the year. GDP in 2008 grew 0.5%.

Bumpy

Howard Archer, analyst at IHS Global Insight, said the GDP figures were "obviously a very welcome development".

"It suggests that the economy ended last year with a little bit more momentum than previously thought," he said. "But it still doesn't fundamentally change our view that recovery is likely to be gradual and bumpy going forward."

The government's temporary cut in VAT and introduction of the car scrappage scheme have in part helped the growth figures.

ANALYSIS
Hugh Pym
By Hugh Pym, Chief economics correspondent

Another upward revision to economic output in the final quarter of last year brings the figure to where many analysts thought it should have been all along. The initial estimate of 0.1% seemed surprisingly low at the time. New data coming into the ONS has proved the point.

The end-of-year deadline for the VAT increase pulled forward consumer purchases and the key question now is what the growth picture turns out to be for the first quarter of this year. January's harsh weather won't have helped. All eyes will be on the first estimate, to be published on 23 April - not far off a likely general election date.

But analysts said the better-than-expected data was also due to companies re-stocking at the end of 2009 after running down their inventories at the height of the recession.

However, government stimulus and the benefits of re-stocking will eventually slow, which is why analysts remain cautious about the economic outlook.

Jonathan Loynes, economist at Capital Economics, said the headline GDP numbers were good news. But he warned: "There are some less encouraging aspects to the figures too. Growth in Q4 was still heavily reliant on public spending and inventories, both areas which are likely to be weaker in coming quarters.

"Overall, some welcome news. But the big picture of a fragile and unbalanced recovery is unchanged," he said.

Separate figures showed Britain's current account deficit narrowed by more than expected over the quarter to £1.684bn from £5.912bn, the lowest since the first quarter of 2008.



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