Britain’s economy shrank more than expected in the last three months of 2012, coming closer to its third recession in four years, after lower output from the North Sea and manufacturers, reports Reuters.
The Office for National Statistics said that Britain’s gross domestic product fell 0.3% in the fourth quarter – a sharper fall than the 0.1% decline seen by analysts. GDP grew by 0.9% between July and September.
The news will be a blow for Britain’s Conservative-led government, which has defended its austerity programme against criticism from the International Monetary Fund’s chief economist.
The economy is now 3.3% smaller than its peak in Q1 2008, recovering only about half the output lost during the financial crisis – a worse performance than other major economies. Britain’s economy also suffered a mild recession from late 2011 to mid 2012.
The biggest driver for the fall in GDP was a 10.2% quarterly drop in mining and quarrying output, the biggest since records began in 1997, driven by disruption to North Sea oil and gas fields.
This knocked 0.18% of GDP, while slightly smaller amounts of damage were done by a falls in factory output and in the ‘government and other services’ category, where the London Olympics had boosted sports and recreation services in the third quarter.
At the start of 2013 one-off factors, such as January’s snow, may seal the fate of an economy on a knife-edge between growth and contraction, with major retailer John Lewis already warning on Friday that snow had hit sales growth.
The International Monetary Fund has cut its 2013 forecast for British economic growth to 1.0% from 1.1% predicted in October.
Output in Britain’s service sector – which makes up more than three quarters of GDP – was flat percent in the fourth quarter after rising 1.2% in the third. Industrial output was 1.8% lower, while construction – which accounts for less than 7% of GDP – grew by 0.3%.
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