GDP decline 'worse than expected'

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The severe weather was still largely to blame for a decline in the economy in the final three months of 2010, says ONS

The strength of the recovery in the UK has been dealt a further blow 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% between October and December, the Office for National Statistics (ONS) said, revised downward from an original estimate of a decline of 0.5%. 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.

But the revised data, which includes details of the expenditure side of the economy for the first time, showed household spending declined 0.1%, 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-busting austerity measures.

The worse-than-feared contraction in GDP will seriously damage prospects for the economy over the next year, as Chancellor George Osborne rolls out his £81 billion package of spending cuts – which include hundreds of thousands of public sector job losses.

The fall in GDP output is likely to shake confidence in the ability of the private sector to pick up the expected slack in the economy and hold off a double-dip recession.

But the Treasury remained defiant following the figures, with a spokesman for the department saying: “The Chancellor said that the fourth quarter growth figures were disappointing and today’s revision doesn’t change that fact.

“It also doesn’t change the need to deal with the nation’s credit card – the country is borrowing more this year than is spent on the entire NHS.”

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%.

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