Instant View - Q4 GDP revised up more than expected

LONDON (Reuters) - Economic growth in the fourth quarter was revised up more than expected after new figures showed the service sector grew five times faster than initially estimated.

The figures show that Britain came out of recession with greater gusto than had been previously estimated by the ONS, but Bank of England policymakers had anticipated at least some upward revision.

The latest revision still makes GDP growth slower than what economists had forecast before the estimate published in January.

ANALYST COMMENTS

JAMES KNIGHTLEY, ING

"The numbers are encouraging, but Q1 2010 has started poorly with retail sales plunging and lending data stalling.

"Consequently, the momentum we had been hoping that the UK would be carrying into 2010 may be falling away already. Some of the weakness will be weather related, but election uncertainty and the implications for taxes and public sector employment is likely to keep sentiment and activity subdued."

PHILIP SHAW, INVESTEC

"The Q4 revisions are better than expected and certainly much better than feared following the publication of the 5.8 percent decline in business investment yesterday.

"There is a little bit of an offset with the downward revision through the Q3 figures, down 0.3 percent. Nonetheless, the figures should help to ease concerns over UK growth prospects.

"(Q1) is going to be a difficult quarter to read, given that the numbers for January and perhaps February have been hit by bad weather.

"Certainly this report suggests there is some forward momentum in the economy."

GEORGE BUCKLEY, DEUTSCHE BANK

"The ONS raised its estimate of GDP growth in Q4 from 0.1% to 0.3% QQ which looks more consistent with the surveys during the quarter. This comes despite a much weaker business investment reading than we had expected.

"Both consumer and government spending contributed to the fragile recovery while inventories look to have added significantly to growth too. Exports rose strongly, but so too did imports meaning net exports have been a negative for growth during the past two quarters. The 0.3% qoq overall growth rate is broadly what the BoE had expected it to be revised to in its recent Inflation Report."

MARC OSTWALD, MONUMENT SECURITIES

"Certainly a pleasant surprise for everybody. It was the services bit which was a little bit of a surprise, even though there is that fairly hefty offset from the downward revisions to construction and government spending.

"Does it really fundamentally change anything in terms of the outlook for the economy? Not really.

"At the end of the day it's not an indication that it is going to be anything durable. The pickup in manufacturing probably owes as much to restocking as anything else, and that may also be the case for services.

"So it is really whether we see some follow through in this quarter which is important."

ROSS WALKER, RBS

"The detail is not so encouraging: government expenditure growth was pretty robust, but that won't be sustained. On the consumption side, that growth is also unlikely to be sustained. We're also still sucking in a lot of imports and in fact trade was a drag."

ADAM CHESTER, ECONOMIST, LLOYDS TSB CORPORATE MARKETS

"A sigh of relief that actually we have indeed pulled out of recession in the fourth quarter. 0.3 percent gives us a little bit more headroom than the 0.1 percent previously.

"But I don't think we are out of the woods. The first quarter is now going to be the focus and given the weak January we have had and the bad weather, there is still a distinct possibility that we could dip back into the red in the first three months."