UK economic growth slows

January 25, 2002 Posted: 1150 GMT

LONDON (CNN) -- The British economy, the world's fourth biggest, grew at the slowest pace in almost three years in the fourth quarter of 2001.

Growth in the last three months of 2001 slowed to 0.2 percent, compared with 0.5 percent in the third quarter, said the Office for National Statistics (ONS). Economists forecast growth of 0.1 percent, according to a Reuters poll.

A global economic slowdown was widely expected to puncture the country's nine-and-a-half-year expansion. But the Bank of England's (BoE's) seven interest rate cuts last year has driven up consumer spending boosting growth.

"Fourth quarter probably marked the trough although we could see an equally weak number in the first quarter," Richard Iley, an economist with ABN Amro, told Reuters.

The stronger-than-expected growth was the smallest quarterly gross domestic product rise since the first quarter of 1999. GDP slowed to 2.4 percent in 2001, compared with 3 percent in 2000.

The BoE, which has threatened to increase interest rates if consumer spending continues to grow pushing up inflation, is unlikely to use this opportunity to flex its muscles.

Interest rates, which are at a 37-year low of 4 percent, have done little to pull the manufacturing sector out of recession but have stimulated house buying and retail spending.

The ONS said the slowdown in fourth quarter growth, from a 0.5 percent rise in the third quarter, was due largely to a sharp contraction in industrial output. But the UK is still the best performing economy among the Group of Seven leading industrialised nations.