Headline GDP Down By 0.2%

UK gross domestic product fell by 0.2% in volume terms in the fourth quarter of 2011 according to a statistical bulletin from the ONS.

Of the output components of GDP output in the production industries fell by 1.4% within which manufacturing fell by 0.8%. Services remained unchanged but the construction sector fell by 0.5%. Agricultural output decreased by 1.5% in Q4 compared with a decrease of 0.6% in Q3 2011. Output of business services and finance increased by 0.1%. Government and other increased by 0.3%.

Household expenditure increased by 0.5% quarter on quarter while gross capital formation fell by 7.6%. The income components of growth and contributions to growth show that employee compensation fell by 0.3%.

Service Sector Increases Growth

The index of services published by the ONS shows that the services sector grew by 2.4% in December 2011 compared with December 2010. All components of the service sector index reported growth. The biggest contributors to the increase were business services and finance which grew by 2.9% and government and other services which grew by 2.3%. The sector also increased on the monthly comparison by 0.2%.

The main contributors of the five components of the business services and finance section were other professional services and real estate. All five components showed an increase. Output increased in five of the six components of the government and other services category with human health and social work activities providing the main contribution with an increase of 3.1%

The public strike on the 30 November probably has an effect on the index but it is difficult to measure the effect directly.

Fall In Business Investment

Business investment fell by 5.6% or £1.7bn to £28.7bn in Q4 2011 compared with the previous quarter. It also fell in the annual comparison by £0.6bn or 2%. Investment in manufacturing fell by £0.1bn to £3.5bn in monthly terms but the annual comparison shows that investment in manufacturing increased by £0.4bn or 11.3% while total non-manufacturing investment fell by 3.5% or £0.9bn.

Borrowing Down By £2.2bn

Net borrowing was £2.2bn lower in December 2011 than it was in December 2010 and the current budget deficit was £2.5bn lower in the same period according to the ONS. Public sector net debt however was up to £1003.9bn (64.2% of GDP) from £883bn at the end of December. These statistics from the ONS exclude the effects of the government's financial interventions.

The financial interventions of the government mean that the current budget deficit was £7.9bn in December 2011 (£11.3bn in 2010), net borrowing was £10.8bn (£13.9bn) and the public sector net debt was £2329.9bn or 149.1% of GDP (compared with £2257bn or 151.8% of GDP).

Confidence Low In Small Businesses

UK SME's are still not confident according to the most recent CBI SME survey. Output is still at the same levels as last quarter but new orders are falling. Concern about the political and economic uncertainty increased sharply the survey suggests.

Retail Sales Down 0.4% In Euro Area

Euro area retail trade fell by 0.4% in terms of volume in December 2011 compared with November while it grew by 0.3% in the EU27 over the same period. Food, drinks and tobacco fell by 0.2% in the euro area and grew by 0.3% in the EU27. Non-food sector categories grew by 0.3% in the EU27 but fell by 0.1% in the euro area.

Total retail trade fell in eleven states and grew in eight states remaining stable in Ireland and Sweden. The highest increases were in Portugal (2.2%), Belgium (1.5%) and Poland (0.7%) and the biggest decreases were in Malta and Slovenia (both -3.1%) and Latvia (-2%).

The annual comparison shows that in December 2011 compared with December 2010 the food, drinks and tobacco sector fell by 1.3% in the euro area and 0.6% in the EU27 and the non-food sector decreased by 1.5% in the euro area but grew by 0.8% in the EU27. The total retail sales index for the EU27 shows growth of 0.1% but in the euro area a fall of 1.6%.

Trade fell in ten states but rose in eleven. The largest increases were in Lithuania (13%), Latvia (7.1%) and the UK (6.3%). The biggest falls in trade were recorded in Portugal (-8.8%), Spain (-5.3%) and Slovakia (-3.3%) (Eurostat).

European Producer Prices Down By 0.2%

The monthly industrial producer price index for December 2011 fell by 0.2% in both the euro area and the EU27 according to figures published by Eurostat. The annual comparison shows an increase of 4.3% in the euro area and 4.9% in the EU27. The average for 2011 was 5.9% in the euro area and 6.7% in the EU27.

Energy prices fell in both zones over the month (0.4% in the euro area and 0.6% in the EU27) but increased over the year (9.5% in the euro area and 9.6% in the EU27). The annual comparison shows the fall in the total industry (excluding construction) producer prices index decreasing year on year in the euro area. The trend is reflected in the index for intermediate goods in both the euro area and the EU27.