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GDP drop worse than expected in Q4 2011

The UK economy shrank 0.3% in Q4 2011, further than the 0.2% previously estimated, Office for National Statistics data shows.

Compared to Q3 2011 services sector output fell by 0.1%, production dropped by 1.3% and construction by 0.2%.

Cost of living was squeezed in the quarter with households’ real disposable income fell 0.2% compared to Q3.

It means disposable income fell by 1.2% over the year, the biggest drop since 1977, according to the ONS.

On the positive side consumer spending rose by 0.4% and exports grew by 1.6%.

Throughout 2011 the UK economy grew by a mere 0.7% although chancellor George Osborne predicted the UK would avoid a double dip recession last week.

In last week’s Budget the Office of Budget Responsibility revised the UK’s 2012 growth estimate upwards from 0.7% to 0.8%.

The change follows a series of drastic downgrades since 2010 when the OBR predicted the UK would be growing at a rate of 3.5% in 2012.

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