January 16th, 2010 9:01 AM

 

Britain's economy fell last year at the sharpest rate since 1921, despite hopes that it finally emerged from recession in the last three months of the year, according to a respected economics forecaster.

The National Institute of Economic and Social Research (NIESR) said today that its latest estimate showed that GDP rose by a modest 0.3 per cent in the final three months of 2009 compared with the third quarter.

That means that, for the year as a whole, the economy contracted by 4.8 per cent, a bigger fall than in any year of the Great Depression and the biggest contraction for 88 years.

However, NIESR went on to say that signs of a recovery were starting to emerge after the economy bottomed out in March last year after 12 months of sharp falls.

In October, NIESR predicted that British GDP would fall by 4.4 per cent in 2009.

Most economists had expected the country to turn the corner in the third quarter of the year, the three months to the end of September.

But official figures shocked economists by showing that the economy was still in recession, falling 0.3 per cent.

That left Britain as the world's last major economy still in recession.

NIESR's prediction of 0.3 per cent growth in the fourth quarter is broadly in line with most economists forecasts.

Today, official figures for Britain's industrial sector provided a mixed signal on whether Britain did indeed come out of recession in the last quarter.

A surge in oil and gas extraction meant that production grew 0.4 per cent from October to November, but manufacturing output had stagnated at low levels with no change for the second successive month.

Further fears about the sustainability of any recovery were triggered today by official figures for Germany showing that, after modest growth in the third quarter, the economy ran out of steam in the fourth quarter.

Growth slumped to close to zero, meaning that, for the year as a whole, the German economy fell a record 5 per cent.

The Office for National Statistics will produce its official estimate for GDP third-quarter growth in two weeks' time.

By Robert Lindsay, Times Online, 1-13-2010

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