Economic review

SUMMARYGross Domestic Product expanded by 0.4 per cent in the final quarter of 2009, but this was not sufficient to prevent an overall annual fall of 4.9 per cent in 2009. On a quarter on quarter basis GDP growth has shown a steady improvement throughout the year. Household consumption recorded modest growth in the second half of the year, driven by an increase in spending on motor cars, and fixed investment moderated from the very large falls in the first and second quarters. Government consumption has also contributed positively to growth throughout most of the year. However, the contribution of changes in stocks is still erratic, and net trade has weighed on growth as imports expand faster than exports – despite the significant depreciation in sterling in late 2008. Household and corporate sector balance sheets show continuing signs of retrenchment as net-lending increases. In the labour market, the headline measures of unemployment, employment and inactivity all deteriorated to a greater extent for men than women over the last two years. This seems to reflect that the fall in jobs was more concentrated in industries where male employment is significantly higher. Manufacturing producer prices inflation has started to pick up in line with rising oil and other commodity prices. However, services producer prices remain in deflationary territory, as difficult market conditions and strong competition places downward pressure on prices.