INSTANT VIEW - Q4 final GDP revised down

LONDON (Reuters) - The economy slowed even more sharply than expected in the last three months of 2008 as construction output plunged, official data showed on Friday.

The fall of 1.6 percent on the quarter was the sharpest decline since 1980.

Separate figures showed Britain's current account deficit narrowed to 7.641 billion pounds in the fourth quarter of 2008 from an upwardly revised deficit of 8.162 billion pounds in Q3.

KEY POINTS

- Biggest quarterly fall in GDP since Q2 1980

- Biggest annual fall in GDP since Q2 1991

- Biggest quarterly fall in construction output since Q4 1980

- Highest household saving ratio since Q1 2006

- GDP in 2008 as a whole grew 0.7 percent, the weakest rate since 1992

KEY POINTS

- The current account deficit for 2008 was 24.5 billion pounds, the lowest since 2003 and equivalent to 1.7 percent of GDP. That compares with a revised deficit of 40.3 billion pounds

in 2007, which was 2.9 percent of GDP.

AMIT KARA, UK ECONOMIST, UBS

"From a policy perspective a small downward revision is probably not very material, not least because Q1 is probably going to look as bad as Q4.

"The striking number within the data was a strong rebound within the household saving ratio. My sense is it will continue to rise."

"You would expect the trade deficit to narrow as imports get squeezed, but only for exports to recover once the global growth recovers."

HOWARD ARCHER, ECONOMIST, IHS GLOBAL INSIGHT

"GDP contraction in the fourth quarter of 2008 was depressingly even greater than previously thought at 1.6 percent quarter-on-quarter and 2 percent year-on-year.

"This was the deepest quarter-on-quarter drop since 1980 and the sharpest year-on-year decline since 1991.

"On the output side, the dominant service sector saw sharp contraction, while both industrial production and construction output nosedived.

"On the expenditure side, consumer spending contracted more sharply than previously reported, plunging by one percent quarter-on-quarter, while there were also sharp declines in business investment and, especially, exports.

"Indeed, the overall decline in GDP would have been even larger but for robust government spending and an even deeper fall in imports than exports. However, there was some good news as inventories were run down substantially, which will help matters when demand finally picks up.

"The household savings ratio spiked up to 4.7% in the fourth quarter of 2008, which was the highest level since the first quarter of 2006 and up sharply from 1.7% in the third quarter. This indicates that increasingly worried consumers are looking to improve their personal finances."

GEORGE BUCKLEY, CHIEF UK ECONOMIST, DEUTSCHE BANK:

"What has been happening over the past year, as we've been transferring foreign banks' losses back to the home country, the current account has been improving."

"Certainly, the improvement we've seen in the current account over recent quarters has been partly due to the repatriation of foreign bank losses."

"Imports are likely to be very much weaker than they have been, exports could be a bit stronger because of sterling, imports weaker because of the combination of sterling and weaker domestic demand. If that happens, it should help the current account improve to the extent that goods trade is improving."