Worse business investment puts Q4 GDP revision in doubt...

Tomorrow's second reading of the Q4 GDP figure has been widely expected to show that the UK emerged from recession at a quicker pace than the 0.1% originally shown in the preliminary reading.

Although analysts weren't expected a dramatic change in the number, a reading of around 0.2% or 0.3% would have given them more comfort for the outlook of the recovery.

However, the likelihood of tomorrow's second reading showing an upwards revision was put in doubt today by news from the Office of National Statistics (ONS) showing business investment falling sharply in the final quarter of the year.  According to the Preliminary reading of business investment in Q4 2009, investment fell 5.8%, compared to a fall of 1.8% in Q3 2009.

Again a health warning must be placed on these figures as they are only preliminary readings and therefore are highly likely to be changed.

For more information: http://www.statistics.gov.uk/pdfdir/bi0210.pdf

There remains a good possibility that GDP will be revised up tomorrow.  Nevertheless these figures suggest that business was not yet confident enough to spend money in the final months of 2009 and were hoarding their cash in anticipation of things continuing to be bumpy in 2010.

Another sign of a better final quarter

Manufacturing output was reported to have grown strongly in the final month of 2009 which provides further evidence to suggest that the UK economy emerged from recession at a stronger than originally report pace in the  final quarter of last year.

http://news.bbc.co.uk/1/hi/business/8508020.stm

In other news today the Bank of England continued to sound cautious on the outlook for GDP growth but warned that in the short term inflation would continue to rise.  This is not surprising given the rapid fall in prices twelve month's ago and rising VAT in January 2010.  They did not give much away as to when interest rates will start to rise...but the end of this year (November) is the best guess.