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UK economy shrinks less than thought

Wednesday, November 25 10:24:18

The British economy shrank for the sixth successive quarter in the three months to September but at a slower pace than previously estimated, official data showed on Wednesday.

The Office for National Statistics said GDP fell by 0.3 percent in Q3 versus a preliminary reading of a contraction of 0.4 percent. The upward revision was expected by analysts who had been surprised by the weakness of the initial print as surveys had pointed to the economy already returning to growth.

Britain's economy has now contracted for six consecutive quarters, the longest unbroken stretch of declines since records began in 1955, when many of its major trading partners have already pulled out of recession. On the year, GDP was down 5.1 percent versus a previous reading of down 5.2 percent. BoE Governor Mervyn King said this week that while growth may return soon, it would take a long time for output to get back to where it might have been without the crisis.

Most analysts are expecting the economy will return to growth at the turn of the year and some said even the latest Q3 reading would be revised higher once statisticians have more complete data. "We hope these numbers are something clearer to the truth," said David Page, economist at Investec. "But we would still harbour some scepticism that this figure is set in stone forever."

Firms continued to run down inventories at a very sharp pace for the fourth straight quarter, marking a record decline over the last year. This could boost hopes of a rebound in growth once destocking was over but the ONS pointed out that inventories fell for 11 consecutive quarters in the 1990s recession. (C ) Reuters