News that the UK did manage to eke out a little growth will give George Osborne some respite in the build up to his Budget following last week’s decision by Moody’s credit rating agency to strip the country of its prized AAA status.
In its second estimate of GDP for the final three months of last year, the Office for National Statistics revealed that it had revised its growth calculations for earlier in 2012.
Although it left its estimate for the fourth quarter unchanged at -0.3pc, it said growth in the third quarter was 1pc rather than 0.9pc and that the economy shrank in the first quarter of 2012 not by 0.2pc but by just 0.1pc.
The changes pushed up the ONS estimate for annual 2012 growth from zero to 0.2pc. However, the economy remains 3.2pc smaller than its peak in the first quarter of 2008 and has grown just 3.4pc since low in the second quarter of 2009, reports The Telegraph.
The explanation for the weakness of the final three months of last year was unchanged from last month.
A collapse in North Sea activity was the major reason for the decline, accounting for 0.2pc of the quarterly fall. Manufacturing was also weak, but a little less weak than had been thought – shrinking by 1.3pc rather than 1.5pc.
And construction, which has been hard hit in the last two years, grew more rapidly than thought – at 0.9pc rather than 0.3pc.
However, the UK’s powerhouse services sector, which accounts for three quarters of UK output, was judged to have shrunk by 0.1pc, a worrying development that compared with the previous estimate of zero growth.
The drop in oil production fed its way through to the trade figures, which showed that exports fell by more than imports – renewing concerns about the ability for the UK to rebalance away from consumer spending to overseas demand.
Consumer spending grew 0.2pc, but it was the slowest rise in four quarters as earnings rose at just 0.1pc.
Hopes that businesses would come to the economy’s rescue by boosting corporate spending were also hit by figures showing that investment fell by 1.9pc, more than undoing the 0.5pc growth in the previous quarter.
Howard Archer, UK economist at IHS Global Insight, said: “It must be noted that the sharper-than-expected drop in GDP in the fourth quarter was influenced significantly by a record drop in mining and quarrying output which was due to repair work on a major North Sea oilfield.
“We expect the economy to eke out modest growth around 0.2pc quarter-on-quarter in the first quarter of 2013 thereby avoiding renewed recession, but this is by no means certain particularly as there was some hit to activity in January from the snow. Overall, we expect UK GDP growth to be limited to around 0.8pc in 2013.”
January surveys of purchasing managers showed growth in the service sector, a tick-up in manufacturing and a fall in construction output, also pointing to modest economic growth.
Early survey evidence of how the economy fared in February has been mixed, with factory order books improving but retail sales rising at the slowest annual pace since September.