Economy emerged from recession at slightly faster rate

The UK economy grew more than had been previously estimated in the final quarter of 2009, new official figures have revealed.

According to the Office for National Statistics (ONS), GDP was up by 0.4 per cent between October and December, a 0.1 per cent improvement on an earlier calculation.

The upward revision was driven by better performances in the business services and the construction industries, the ONS said.

The extra spurt in growth, as the economy emerged from recession, was aided by the government’s temporary reduction in VAT and by business re-stocking after a year in which inventories were depleted during the course of the recession, analysts suggested.

But the momentum provided by government support schemes, which are now being run down, and the re-building of stocks may slow, experts warned, pointing to a continued fragility in the recovery.

Ian McCafferty, the CBI’s chief economic adviser, said: “The latest GDP data shows the UK exiting recession at the end of last year with a bit more momentum than initially estimated, more in line with our forecasts.

“But the figures for growth at the start of this year will be the ones to watch out for, now the VAT cut and the car scrappage scheme have passed. We are forecasting slower growth in the first quarter of this year, and a slow and fragile recovery for some time.”

David Kern, chief economist at the British Chambers of Commerce, added: “These figures are stronger than earlier estimates and better than most analysts’ expectations. It is important to stress that UK growth in the fourth quarter of 2009 was stronger than that of the Eurozone. Nevertheless, it is clear that the UK recovery is still frail, vulnerable, and businesses are facing serious pressures.

“From now onwards, the main aim must be to ensure that the modest recovery consolidates and gathers momentum. It is critical for both the government and the Monetary Policy Committee to pursue policies that make it possible for business to invest and export.

“A double-dip recession is still a potential threat that must be avoided at all costs. Given the dangers still facing the economy, policy must remain expansionary. Any consideration of raising interest rates and withdrawing the QE stimulus must be postponed until there is more conclusive evidence that growth is secure.”

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