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UK's third quarter GDP revision modest

UK economy - Official Q3 figures disappoint
UK economy - Official Q3 figures disappoint

Britain's economy shrank by 0.2% in the third quarter of this year, a smaller upward revision than expected after stronger construction ouput was offset by a weakening in the services and industrial sectors.

The previous estimate of third quarter GDP had showed a 0.3% decline. Britain remains officially in recession unlike most of its major trading partners.

Analysts had expected third quarter GDP to be revised up to a decline of just 0.1% after a sharp upgrade to construction output data released earlier this month.

However, there were some encouraging signs that parts of the economy had turned the corner, with the first growth in household spending since early 2008.

The Office for National Statistics said construction output grew 1.9% in the quarter, compared with a previous estimate of a 1.1% decline.

But services and industrial production output were both revised lower to show declines of 0.2% and 0.9% respectively - both 0.1 percentage points below previous estimates.

The ONS said total economic output has fallen by 6.03% since Britain entered recession in the second quarter of 2008 - confirming the sharpest decline since quarterly records began in 1955.

However, recent activity surveys have suggested Britain's economy is regaining some strength and most experts expect it to have returned to growth in the final three months of this year after six quarters of recession.

There are also signs that the Bank of England's cut in interest rates to record lows and its £200 billion sterling asset buying programme are helping to revive the economy.

The government's car scrappage scheme has also provided a boost, contributing to the 0.1% quarterly rise in household spending, the ONS said. Real household disposable income was 1.2% up on the quarter and 5.2% higher than a year ago - the biggest annual rise since 2001.

However, Britons are also putting more money aside, with the household saving ratio rising to 8.6% from 7.6% in the April-June period - its highest in more than a decade.

There was also positive news on Britain's current account deficit, which at £4.703 billion sterling in the third quarter, was just half analysts' expectations. The second quarter deficit was revised down sharply to £4.375 billion from an earlier estimate of around £11.4 billion.