The Office for National Statistics attributed the rise in GDP to positive data from distribution, hotels and restaurants and government and other services. Output for the UK service and production industries both increased by 0.1%.
The economy had previously contracted for a record six consecutive quarters, while GDP had decreased 3.2% between Q4 2008 and Q4 2009.
Reaction to the data has been mixed, with Q4 growth lower than many analysts’ estimates.
“The 0.1% rise in GDP growth in Q4 was far lower than city consensus of 0.4%, though preliminary estimates only have about 40% of the final information required to produce a final estimate, and are subject to revisions,” said Azad Zangana, European economist at Schroders.
“The latest estimate provides end of year annual growth. The worst performing sectors of 2009 was the manufacturing sector, contracting by -10.8%, while the construction sector shrank by -10.5%. The best two performing sectors were the Government sector and the Distribution, hotels & restaurants sectors, contracting by -0.8% and -4.6% respectively.”
Zangana estimates that it will be at least three years before the UK returns to the level of output achieved in 2007, and as a result the Bank of England will keep interest rates on hold at least until there is some evidence of the recovery gathering pace.
“The UK is particularly prone to double-dip recessions, and early fiscal or monetary policy tightening could easily push the UK economy under the water again,” he added.
Elsewhere, Duncan Higgins, senior analyst at Caxton FX, pointed to a tumble in the value of the pound in response to the data.
He said: “Investors had priced in a stronger figure and so the markets have immediately reacted, with the pound currently down over a cent from its highs against both the euro and the US dollar.”
