By Agency Reporter

Thursday, 23 Dec 2010

London: The United Kingdom economy grew less than previously estimated between July and September, revised figures have shown. The British Broadcasting Corporation reported on Wednesday that the Office for National Statistics said UK Gross Domestic Product grew by 0.7 per cent in the third quarter, down from its earlier estimate of 0.8 per cent.

It also cut the growth figure for the April-to-June quarter to 1.1 per cent from 1.2 per cent, and the first quarter growth figure to 0.3 per cent from 0.4 per cent.

It blamed the revisions on weaker growth in the construction, business services and manufacturing sectors.

The year-on-year growth estimate was also cut, with the ONS saying that Gross Domestic Product in the third quarter had grown by 2.7 per cent compared with the same point last year, down from the previous estimate of 2.8 per cent.

The latest official figures are likely to increase concerns that the rate of economic growth will slow further in 2011 as a result of the impact of the government‘s £85bn spending cuts, and Value Added Tax rising to 20 per cent from 17.5 per cent on January 4.

A number of organisations have already recently lowered their forecasts for UK economic growth in 2011.

The CBI business group now expects growth of 0.2 per cent in the first quarter of next year, down from 0.3 per cent.

The British Chambers of Commerce was predicting the economy would expand by 1.9 per cent in 2011, but this is down from the 2.2 per cent growth it forecast in September.

There‘s something in these figures for both the pessimists and the optimists.

Those who think the underlying recovery is fragile and the UK is in for a tough time next year will feel that downward revisions to growth in the first three quarters of this year reinforce their argument.

Those who believe the recovery is healthy will point out that changes of 0.1 per cent were within normal margins for error and that UK growth still looks perfectly respectable.

Earlier estimates of construction output always looked exaggerated – the revised figures seem more realistic. Business investment is now thought to have been stronger than previously thought – a positive signal.

The BCC had also blamed the eurozone debt crisis and the weak housing market.

The Office for Budget Responsibility has said it expects economic growth of 2.1 per cent next year, compared with an earlier forecast of 2.3 per cent.

Investec analyst, Philip Shaw, said that he was not surprised by the downward revisions to the economic growth figures.

He added: ”It doesn‘t change the big picture that the economy was doing pretty well over the middle of the year.

”Taken over the year as a whole, Gross Domestic Product growth was still, would almost certainly be, above most expectations at the start of this year.”

The latest figures from the ONS came as minutes from this month‘s meeting of the Bank of England‘s Monetary Policy Committee showed that just one of its nine members – Andrew Sentance – was continuing to call for a rise in UK interest rates.

Source: Punch