UK economy grew in 2012 - but only just!

Figures from the Office for National Statistics suggest that the UK economy did not flat-line last year as had been suggested, but instead grew by 0.2%. 


The figures will be welcome news to the Chancellor as he prepares for the Budget and give some respite from last week’s decision by Moody’s credit ratings agency to downgrade the UK’s AAA status.

The revised growth figures from the ONS were based on updated calculations from the first and third quarters of 2012.  The data showed that the economy shrank by just 0.1% rather than 0.2% in the three months of the year and grew in the third quarter by 1% rather than 0.9%.

The changes pushed the annual 2012 growth estimate from zero to 0.2%.  Despite this, the economy remains 3.2% smaller than it’s peak in the first quarter of 2008.

The economic contraction by 0.3% in the fourth quarter of 2012 was driven by a fall in North Sea oil production, weak manufacturing and a 0.1% fall in the UK services sector.  However, the construction sector showed renewed signs of life, growing by 0.9% rather than the predicted 0.3%.

Economist at HIS Global Howard Archer said;

“We expect the economy to eke out modest growth of around 0.2% quarter-on-quarter in the first quarter of 2013 thereby avoiding renewed recession, but this is by no means certain particularly as there was some hit to activity in January from the snow.  Overall we expect UK GDP growth to be limited to around 0.8% in 2013.”

Early indications from January and February’s economic data also points towards modest growth with factory order books improving but retail sales rising at the slowest annual pace since September.

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