LONDON: Britain’s economy shrank even more abruptly than expected in the last three months of 2008 as construction output was revised sharply lower and firms ran down stocks at a record pace, official data showed yesterday.
While the fall in inventories should boost the recovery when it comes, few analysts expect any return to growth this year.
The International Monetary Fund reckons Britain’s economy will contract by 3.8 percent in 2009, its worst performance since World War II. The Office for National Statistics’ GDP data showed the economy shrank by 1.6 percent in the fourth quarter, the sharpest decline since 1980. Analysts had expected a reading of -1.5 percent, unchanged from the preliminary figure.
The annual rate of decline was revised down to 2.0 percent, the sharpest fall since 1991. “The GDP contraction was depressingly even greater than previously thought,” said Howard Archer, economist at IHS Global Insight.
The pound slipped after the figures, which reinforced fears that Britain would be one of the economies hardest hit by the global downturn.
Still, Britain is far from the only country whose economy floundered at the end of last year. Germany’s economy shrank by 2.1 percent in the fourth quarter, its worst reading since reunification, Japan contracted by 3.2 percent, its worst performance since the oil crisis of 1974 and Ireland shrank by 7.1 percent, its sharpest contraction ever.
Construction output in Britain slumped by 4.9 percent in the fourth quarter, the biggest quarterly fall in almost 20 years and a far sharper decline than the 1.1 percent drop initially estimated.
There was also evidence that the bleak economic climate was making Britons more thrifty. The household saving ratio jumped to 4.8 percent, it highest level in almost three years, from 1.7 percent in the previous quarter. “Households have been helped by the cuts in interest rates and are reluctant to spend because of the economic climate,” said Philip Shaw, economist at Investec.
