GDP fall in Q4 blamed on manufacturing

Posted on 24 Feb 2012

UK GDP dropped by 0.2% in the fourth quarter of 2011 according to data released by the Office for National Statistics today.

Output in the production industries fell by 1.4%, with manufacturing contributing to this with a drop of 0.8% compared to the previous three months.

The second estimate of UK GDP for the three months up until December 31 confirms that the UK slid back into contraction. On the positive side, consumer spending rose 0.5% and exports surpassed expectations by surging a strong 2.3%.

The drop in activity late last year reflected a downturn in the global economy, with the contractions not  limited to the UK. GDP also fell in the Euro zone and Japan and slower growth was evident in China.

Italy, the Netherlands, Portugal and Belgium were already confirmed to have been back in recession in the fourth quarter of last year, highlighting the weakness that has spread throughout continental Europe.

Compared with the fourth quarter of 2010, total manufacturing investment rose by £0.4 billion (11.3%), while non-manufacturing investment fell by £0.9 billion (3.5%) over the same period.

However, total manufacturing investment fell by £0.1bn to £3.5 bn (2.4%) when compared with the previous quarter, which still made it one of the strongest sectors for investment as new funds within the rest of the UK decreased by £1.6 bn to £25.2 bn (6%) when compared with the previous quarter.

Chris Williamson, director and chief economist at Markit, which produces the Purchasing Managers Index, said: “The UK economy contracted slightly in the final quarter of last year but a recent improvement in the economic environment at home and abroad suggests that things certainly improved on the all-pervading gloom that seem to preside late last year.

Mr Williamson added: “Unless the Euro zone debt crisis escalates, the coming year is therefore likely to see modest growth. Business conditions are also showing signs of at least stabilising in other countries, notably the euro zone, which should help boost UK exports further.