Decline in economy was worse

The strength of the recovery in the UK was dealt a further blow yesterday as official figures revealed the decline in the economy in the final three months of 2010 was worse than originally feared.

Gross domestic product declined by 0.6 per cent between October and December, the Office for National Statistics (ONS) said, revised downward from an original estimate of a decline of 0.5 per cent. It is the largest GDP fall in more than two years, since the second quarter in 2009.

The severe weather in December was still largely to blame for the plunge in the fourth quarter, the ONS said, which ended a year of growth in the UK.

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But yesterday’s revised data, which includes details of the expenditure side of the economy for the first time, showed household spending declined 0.1 per cent, the first drop since the second quarter of 2009.

The figures were worse than economists expected and will raise further concerns over the strength of the economy and its ability to withstand the coalition Government’s deficit-fighting austerity measures.

The worse-than-feared contraction in GDP will seriously damage prospects for the economy.

A spokesman for the ONS said without the weather, the revised GDP output in the fourth quarter was still likely to have shown a decline of 0.1 per cent. A drop in business investment, which was down 2.5 per cent to £29.6bn in the fourth quarter, hurt the expenditure figures, they added.