Britain’s Gross Domestic Product shrank in volume terms by 0.2% in the last quarter of 2011 confirmed the Office for National Statistics. The ONS also revised down the growth for the whole of 2011 from 0.9% to 0.8%.

On the better side exports rose by 2.3% and consumer spending was up 0.5% in the last quarter of the year, the first positive figure for five quarters.

Production industry output also fell by 1.4%, within which manufacturing saw a 0.8% fall.

Service industry output remained unchanged.

But Construction industry output saw a 0.5% fall.

Business investment also fell by 5.6% from £30.4 billion in Q3 to £28.7 billion in Q4 and was also down 1.9% compared to Q4 2010.

The ONS also reports in its Second Estimate of GDP Q4 2011 that compensation to employees in current price terms fell by 0.3% in 2011 Q4.

Commenting on the figures Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said “The pickup in consumer spending is a welcome surprise and is broadly consistent with the stronger retail sales figures. Although it comes against a backdrop of falling real incomes, there must be some doubt over whether it can be sustained. On the downside there is still a worrying reliance on the public sector, without which GDP would have declined even further.

The impact of the Eurozone crisis is clearly shown through the sharp decline in business investment. The climate of uncertainty has caused firms to sit on their cash and unfavourable credit conditions are compounding the issue further. Even after this week’s deal for Greece, it’s difficult to envisage this situation changing significantly in the short-term.

Recent survey data suggests that the chances of a second successive decline in GDP in Q2 – a technical recession – have receded. However, even if that figure does prove to be positive, any recovery thereafter is likely to be slow and patchy. The strong increase in both consumer and government spending is unlikely to be sustained, while reduced demand from the Eurozone implies that prospects for export growth are also weak.”

Image by Richard Kay [CC-BY-SA-2.0 (], via Wikimedia Commons

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