David Kern, Economic Adviser to the British Chambers of Commerce (BCC), said:
"The preliminary GDP estimates for Q4 2005 confirm that, although the pace of activity has improved slightly in Q4, year-on-year growth remains significantly below trend. The figures published today were broadly anticipated by the results of the BCC's Quarterly Economic Survey (QES) published last week. Although the worse may be over for the economy, any upturn is very fragile. Without support from the Chancellor and the Bank of England, the upturn could easily go into reverse.
"Quarterly GDP growth was 0.6% in Q4, after 0.4% in Q3 and 0.5% in Q1. Year-on GDP growth was only 1.7% in Q4, after 1.7% in Q3, and 1.6% in Q2, all well below the economy's long term trend. The 0.9% quarterly growth in services in Q4 was better than expected. But the performance of manufacturing was dismal. In Q4 2005, manufacturing output fell by 0.2% quarter-on-quarter and 1.8% year-on-year. This means that the sector recorded outright declines in three out of the last four quarters. In annual average terms, manufacturing fell by 0.6% in 2005 as a whole, the third full year fall over the past five years, a truly alarming record."
David Kern concluded: "In spite of the modest improvement in GDP growth in Q4 2005, powerful fundamental factors continue to support the case for an early modest interest rate cut: UK unemployment is rising, year on year GDP growth is significantly below-trend, and wage rises and CPI inflation have both eased. The rise in sterling significantly reduces any risks that may be associated with an interest rate cut."