Triple-dip fears raised as UK economy shrinks

The UK economy contracted by 0.3 per cent in the final quarter of 2012, according to data from the Office for National Statistics.

The contraction comes after the third quarter saw UK GDP grow by 0.9 per cent and fuels fears that the UK could sink into a triple-dip recession.

Consensus expectations had been for a 0.1 per cent contraction in GDP growth.

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The Q4 figures mean that UK economic growth was completely flat in 2012.

The production sector was the main contributor to the contraction, as its output decreased by 1.8 per cent compared to the third quarter of 2012. The services industry showed flat growth while construction sector output increased by 0.3 per cent.

Low retail sales during the festive period and data from the purchasing manager’s index (PMI) had already raised expectations that UK growth contracted, while the National Institute of Economic and Social Research (NIESR) had earlier this year correctly predicted that the UK economy had shrunk by 0.3 per cent in Q4.