Page last updated at 11:03 GMT, Wednesday, 25 November 2009

UK economy shrinks less than thought

Shoppers in a gadget shop
Retail sales have shown a recent pick-up

The UK economy contracted at a slower pace than originally estimated between July and September, figures show.

Third quarter economic output shrank by 0.3%, an improvement on the original estimate of a 0.4% contraction.

The first estimate surprised analysts by showing that the economy was still in recession and not growing.

The new figures confirm the economy has contracted for six consecutive quarters - the longest unbroken stretch of since records began in 1955.

Stephanie Flanders, BBC economics editor
There's no getting around the increasingly wide discrepancy between the surveys, and the employment data, on the one hand, and the official data on the other
Stephanie Flanders, BBC economics editor

The UK is lagging many of its rivals. France, Germany Japan and the US have all already exited recession.

Alan Clarke from BNP Paribas said: "We still think there are further upward revisions to come [to the third quarter figures]. I think it will end up at close to zero but it takes time."

The latest set of figures from the Office for National Statistics (ONS) contained upgrades for the motor sector, which may have been due to the impact of the government's car scrappage scheme.

"We do know that motor trades were a little bit stronger and it's possible, though we can't be sure, that the car scrappage scheme had a little bit more effect than we'd previously allowed for," said Joe Grice, chief economist at the ONS.

Output in the service sector was revised to a fall of 0.1%, an improvement to the original estimate of a 0.2% decline.

The manufacturing sector was also revised to a fall of 0.1% from the previous estimate of 0.2%. However, lower oil and gas extraction meant that overall production fell by more than previously estimated.

The British Chambers of Commerce said the latest figures reinforced their view that "the government and MPC must take urgent action to end the recession".

The EEF manufacturers body said: "Without an extension of support for business investment in the pre-Budget statement next month, it will be difficult to see where the momentum for growth will come from."

Earlier on Wednesday, Bank of England monetary policy committee member Andrew Sentance said there were signs the UK economy had returned to growth in the second half of this year.

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