UK GDP falls by 0.2% in fourth quarter

UK GDP for the fourth quarter of 2011 dropped by 0.2%, a worse than expected figure that will heighten fears of a double-dip recession.

Economists had forecast a fall of 0.1%. On a year-on-year basis GDP rose by 0.8%, as expected. GDP for 2011 as a whole rose by 0.9%.

The ONS said the public sector strike seen on 30 November likely "had some impact" on the Q4 figure but said it was not possible to measure the effect directly and suggested the direct impact was minimal.

The ONS said production activity was down 1.2%, manufacturing falling 0.9%, construction down 0.5% and activity was flat in the services sector on the quarter.

Sterling moved fractionally up to $1.5555 on the news, having fallen to $1.5543 just ahead of the figures from a three-week high of $1.5629.

"It is of some comfort that the CIPS/Markit business surveys were heading up at the tail-end of Q4. But this might just have been a temporary improvement.

"Indeed, our bet is that the UK is now back in recession and that the economy will continue to contract for most of this year," said Vicky Redwood, chief UK economist at Capital Economics.

The forecaster expects the Bank of England to announce a further £75bn of QE next month.