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News: UK set for economic gloom?

Thu, 24 Jan 08

The UK’s economic growth slowed significantly in the final three months of 2007...

The economy expanded by an estimated 0.6% - in line with most economists' expectations - between October and December, according to the Office for National Statistics. Slower growth in the services sector - which accounts for almost three-quarters of the economy - was largely behind the figures, which left estimated growth for the whole of 2007 at 3.1%.

The fourth-quarter growth of 0.6% - the lowest since the third quarter of 2006 - reflects five interest rate rises from the Bank of England to keep inflation under control. GDP growth in the previous three months was 0.7%, and 0.8% in the opening two quarters of 2008.

New rate cut expected

The figures will give encouragement to policymakers on the Bank's Monetary Policy Committee, which is looking to slow economic growth gradually this year to help keep a lid on inflation. A second rate cut next month to follow December's 0.25% reduction to 5.5% is widely expected by the market to avert too sharp a slowdown in the economy.

According to Treasury forecasts, growth will be between 2% and 2.5% this year. There was more gloom for the manufacturing sector, which saw flat output in the fourth quarter. The figures also highlighted the impact of last August's credit crunch crisis in global markets on business services and finance.

The slowdown represented a weakening in financial mediation, stock exchange transactions and computing services, the ONS said.

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