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Economy still contracting but at slower rate

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The UK economy is still shrinking but at a more moderate rate.

The Office for National Statistics (ONS) has issued a revised estimate for GDP in the third quarter of the year.

Its previous estimate of a 0.4 per cent decline was greeted by surprise by many analysts. Now the statistical organisation has, as anticipated, revised its figures upwards but only by a small margin.

According to the ONS, the economy shrank by 0.3 per cent in the third quarter, still leaving it mired in recession.

A more detailed analysis of the data showed that manufacturing output fell quite sharply (0.8 per cent), while there was also a more moderate drop in the services sector (0.1 per cent).

The result is that the UK economy is now 5.1 per cent smaller than it was a year ago.

It is thought that the Chancellor, Alistair Darling had been waiting for the revised set of figures before applying the finishing touches to his economic forecasts in the pre-Budget Report.

The ONS took the step of publishing an article alongside the new data, perhaps in response to criticism that it had underestimated the progress being made by the economy. The article said that the UK’s first estimate of GDP is the earliest provided by any developed economy and that average revisions amount to no more than 0.05 per cent between the initial estimates and those delivered two years later.

Some observers believe that further revisions for the third quarter will still be made, suggesting that growth may have been closer to 0 per cent than 0.3 per cent.