Economic Review

SummaryGross Domestic Product fell by 0.5 per cent in the final quarter of 2010 according to preliminary estimates. The Office for National Statistics judges that this contraction was mainly due to disruption caused by severe weather conditions in the run up to Christmas. However, even allowing for the effects of bad weather, GDP would otherwise have been broadly flat on the quarter ‐ marking a slowdown in growth from earlier in the year ‐ particularly in the services sector. In the calendar year 2010, public sector net borrowing excluding the impact of government intervention in the financial sector fell below 10 per cent of GDP. However, the current budget balance was broadly unchanged from 2009, with the fall in net borrowing reflecting a fall in public sector investment. Public sector net debt measures now include the liabilities of RBS and Lloyds Banking Group (LBG) ‐ and in December 2010 totalled 154.9 per cent of GDP. Excluding the government's interventions in the financial sector, public sector net debt was significantly lower at 59.3 per cent. Consumer prices inflation rose to 3.7 per cent in December, and continue to be driven by indirect taxes, energy prices and food prices.