The U.K. economy shrank more than expected in the third quarter as service industries took a severe hit.
Gross domestic product dropped 0.6% from the second quarter, its biggest decline in almost 18 years, the Office for National Statistics said Tuesday. The final result was lower than the previous estimate for a drop of 0.5%.
Output in production industries fell 1.4%, while output in the services industry declined 0.5%.
Economists for BNP Paribas said the main reasons for the revision appear to be slightly lower government spending, weaker investment and higher imports. They warned that the fourth quarter looks very grim and could show a drop of 1%.
The Bank of England and the government are desperately trying to foil a lengthy recession. BoE policy makers have slashed the benchmark interest rate to its lowest level since 1951 and may cut it further. Meanwhile, Gordon Brown's government has tried to revive spending my reducing sales tax from 17.5% to 15%. Early next year it plans to reveal additional measures.
There was better economic news from across the Channel on Tuesday, however, with French consumer spending unexpectedly rebounding in November, as inflation slowed and stimulus measures started to bear fruit.
Spending by consumers rose 0.3% last month from October, when it dropped 0.5%, the French national statistics office Insee said.
Economists polled by Dow Jones Newswires expected a monthly drop of 0.3% in November.
BNP Paribas economist Dominique Barbet said the recovery in purchasing power, thanks to declining oil prices, supported consumption in the quarter, outweighing the impact of a confidence dive.
