UK recovery defies early expectations
The UK moved faster out of recession than was first thought in the final three months of 2009, official figures showed yesterday.
The economy grew by 0.4% between October and December — stronger than the 0.3% advance previously estimated by the Office for National Statistics (ONS).
The ONS said output shrank by 4.9% during 2009 as a whole — less than the 5% slump first feared, but still the biggest fall since official records began.
While yesterday’s upward revision gives some comfort, the real focus will be on the first official estimate for output between January and March.
This will arrive on April 23 — deep into a likely General Election campaign — and could show a slide back into recession after the impact of January's snow |on sectors such as retail, as well |as the return of VAT to 17.5%.
“The economy was receiving a lot of help in the fourth quarter of 2009 from monetary and fiscal stimulus and these props are starting to be removed,” warned IHS Global Insight economist Howard Archer.
The figures published yesterday showed a slightly shallower 0.9% fall in construction output during the final three months |of last year, while business investment has also fallen by less than expected.
But the proportion of income put aside by families shrank to 7% from 8.4% — its first quarter-on-quarter fall for since July-September 2008 — which may reflect households bringing forward spending to beat VAT hikes.
ING economist Mark Cliffe however said the fall in savings was a “sign of things to come”, and claimed the average household has accessible savings of just £2,200, according to the bank's research.
He warned: “A temporary blip in income earlier last year will not be repeated this year as labour income slows and taxes rise.
“This means that further falls in the savings ratio will be needed if spending is not to decline.
“Since banks are likely to be less willing to lend and consumers less willing to borrow than in |previous cycles, households may have to scale back their purchases of assets.”
A Treasury spokesman said: “While it is welcome to see an upward revision, recent data in the EU and elsewhere has highlighted there are still risks and uncertainties to this recovery and there is no room for complacency.”