Friday, February 24, 2012
Investment drags down growth
Posted by David Smith at 01:00 PM
Category: Thoughts and responses

The second estimate of gross domestic product for the fourth quarter showed a drop of 0.2%, as expected, though the detail was interesting. On the production side, the mild weather contributed to a bigger drop in gas and electricity supply than originally estimated, while on the expenditure side a big drop in gross fixed capital formation, 2.8%, offset a 0.5% rise in consumer spending and a 1% increase in government final consumption expenditure. The drop in the trade deficit from 4.4 billion in the third quarter to 2.5 billion in the fourth meant net trade contributed to growth.

The figures showed a 0.1 point downward revision to growth in the first and third quarters, reducing the 2011 growth rate. This is the Office for National Statistics' description:

"GDP over the year [2011] grew by 0.8 per cent, compared with 2.1 per cent for 2010. The economy has now recovered just under half of the output lost during the 2008-09 downturn growth of 3.4 per cent since the end of the contraction, during which GDP declined by more than 7 per cent.

"The subdued economic environment and sentiment continued into the last quarter of 2011, with a number of key economic indicators, in addition to GDP, reflecting the adverse economic conditions in the UK, as well as in the euro area."

These are, of course, early days. GDP revisions tend to come later and investment is one of the most revised series. This time last year the ONS put growth in 2010 at 1.3%. Now it is 2.1%. More on the latest numbers here.