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Worries despite consumer spending increase

UK household spending edged up by 0.2% in the final quarter of 2012, as overall economic output dropped by 0.3%, official figures have revealed.

The 0.3% drop in gross domestic product was un-revised yesterday when the ONS published its second estimate of GDP. This means that, if output were to fall again in the current quarter, the UK would record its third recession since 2008.

But revisions to past data meant GDP in 2012 was up 0.2% on 2011. The ONS had calculated, when it published initial fourth-quarter GDP data last month, that economic output in 2012 was unchanged from 2011.

Yesterday's figures also showed a 0.6% rise in Government spending during the fourth quarter.

Samuel Tombs, UK economist at consultancy Capital Economics, said: "The second estimate of Q4 GDP confirmed that the economy finished 2012 on a weak footing. And, with signs that activity has struggled to pick up at the start of 2013, a triple-dip recession can still not be ruled out."

He added: "Whether GDP growth in the first quarter is a small positive or negative number is largely by the by. The big picture is that high inflation, fiscal austerity and a weak external environment look set to mean that the UK economy is on course for another year of stagnation."

Mr Tombs cited support to GDP in the fourth quarter from household and Government spending.

He added: "Given the likely re-intensification of the squeeze on households' real pay this year and further austerity, we doubt that spending in these areas will continue to support growth."

The latest GDP figures highlight the drag on the economy from net trade.

UK exports tumbled by 1.5% in the fourth quarter.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "There is no denying that the economy continues to find it hard to develop even modest sustainable expansion."

Noting fourth-quarter GDP was still "some 3% below" the peak level seen in the first quarter of 2008, he added: "We suspect that GDP will not return to the level seen in the first quarter of 2008 before the second quarter of 2015 – a gap of more than seven years."

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