UK economic growth revised down to 0.3% contraction

The UK's economic growth for the last three months of 2011 has been revised down to a contraction of 0.3%.

The first two estimates of gross domestic product (GDP) from the Office for National Statistics (ONS) showed a contraction of 0.2%.

The ONS blamed the revision on the transport and communications and business services and finance sectors.

The annual figure for 2011 growth has also been revised down to 0.7% from 0.8%.

There was also a revision to the GDP figure for the three months from April to June 2011, which was revised from no change to a 0.1% contraction, meaning that the economy has been alternating between growth and contraction in successive quarters since the middle of 2010.

Analysts expect that trend to continue, meaning that the economy will have grown in the first three months of 2012, and that once again there will not have been a technical return to recession.
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Bank of England governor Sir Mervyn King has predicted that the economy will continue to zig-zag between growth and contraction this year.

The pound fell to a two-week low against the US dollar of $1.5904 after the release of the data.

"What does it mean? Probably not a lot. But it kind of makes the starting point for 2012 that little bit more difficult," said Peter Dixon at Commerzbank.

"To some extent where you start determines your average outcome for the year, [so] it just makes the hill a little bit steeper in order to reach the Office for Budget Responsibility's 0.8% growth target."

But the data from the ONS was not all revised downwards.

"The one bright spot in the numbers is the investment figures have been revised up and that was a particularly shocking weakness in the original estimates, so I'm pleased to see that," said Brian Hilliard at Societe Generale.

The ONS also said real household disposable income had fallen by 1.2% in 2011, the biggest decline since 1977.