UK third-quarter GDP drop may be revised after slump eased

London : The UK economy shrank less than previously estimated in the third quarter as the longest recession on record eased, a survey of economists shows.

Gross domestic product probably fell 0.3 per cent from the second quarter, less than the 0.4 per cent drop reported on October 23, according to the median of 28 economists' forecasts in a Bloomberg News survey.

Overdone

"The shrinkage looks a bit overdone," said Alan Clarke, an economist at BNP Paribas SA in London. "Other surveys are showing output isn't nearly as downbeat. I wouldn't be surprised to see it eventually put close to zero."

The Bank of England this month expanded its bond purchase plan by £25 billion (Dh151.5 billion) after the economy's third-quarter contraction took policy makers and economists by surprise. Governor Mervyn King said on Tuesday the bank has been encouraged by signs of a recovery even if it isn't "particularly strong."

A revision higher may help Prime Minister Gordon Brown as he tries to erode Conservative Leader David Cameron's lead in opinion polls in time for the election, due by June. An Ipsos Mori poll in the Observer on November 22 showed the Conservatives with a six-point lead, the least since December.

Unemployment rose at the slowest pace in 18 months in October, retail sales rose for a second month and the inflation rate increased more than expected, to 1.5 per cent. The bank aims to keep inflation at 2 per cent.

Fourth-quarter exit

The UK's recovery has lagged behind that of the US and the euro area, which have both returned to growth. Data on Wednesday showed Germany's economic growth accelerated in the third quarter, while the US economy expanded at a 2.8 per cent annual rate, less than the government reported last month.

The Bank of England forecasts Britain will exit recession in the fourth quarter. The economy will expand 2.2 per cent in 2010 and 4.1 per cent in 2011, according to policy makers' projections published on November 11.