British Fourth-Quarter Growth

February 25, 2009

Real GDP dropped 6.0% last quarter at an annualized rate (saar) and posted a 1.9% decline from 4Q07.  On those two bases, 4Q08 had the worst results in 114 quarters and 70 quarters, respectively. By activity, the production, construction, and services sectors recorded declines of 16.8%, 4.3%, and 3.7% saar.  Within the first of these categories, manufacturing plummeted 19.6%.  Among major components of aggregate demand, exports slumped 20.2% saar.  Business investment and personal consumption dropped by 8.9% saar and 6.0% saar.  If not for a 6.1% annualized rise in real government expenditures, British GDP would have dropped at a 7.2% seasonally adjusted annual pace in the quarter.  Unlike Germany (see my earlier post today), the change in British inventories affected economic growth in the U.K. extremely negatively.  Net foreign demand actually made a positive growth contribution of somewhat more than a full percentage point to annualized growth because imports plunged 21.6% saar.  Incidentally, the drying up of British import demand is a very bad omen for Euroland growth insofar as the U.K. is the common currency’s most important nation-state trading partner.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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