March 2010

SUMMARYRevised estimates of GDP report that the UK economy grew by 0.3 per cent in the final quarter of 2009. In the services sector, growth was driven by the motor trades, wholesale distribution and other business activities industries. In the production sector, positive growth contributions came from the engineering and allied industries. In terms of the expenditure measure of GDP the main positive impact was in inventories as the rate of de-stocking declined. Household consumption and government spending also grew during quarter four, but gross fixed capital formation and net trade weighed on GDP growth. Retail sales fell due to a large fall in the purchase of automotive fuels in January, partly due to the impact of bad weather on the amount of travelling. However, excluding automotive fuels retail sales continued to be supported by Internet spending and discounting. In the labour market there was a small reduction in unemployment in 2009 Q4, but average durations of unemployment continue to rise. Evidence continues to suggest that younger people have been particularly affected by tighter labour market conditions, showing the strongest rise in unemployment and inactivity rates. Both CPI and RPI inflation picked up strongly in January due to rising motor fuel prices and also the reversion of VAT from 15 per cent to 17.5 per cent.