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PREVIEW-UK GDP fall seen easing in Q1, outlook still grim

Published 04/23/2009, 11:14 AM
Updated 04/23/2009, 11:24 AM
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* WHAT: UK preliminary Q1 GDP data

* WHEN: April 24, 0830 GMT

* Economists expect 1.5 pct Q1 decline after 1.6 pct Q4 fall

LONDON, April 23 (Reuters) - Britain's economic downturn probably slowed a little in the first three months of this year, official data is likely to show on Friday, but the figures will provide little cheer as recovery is still a distant prospect. Britain will be the first major economy to publish first-quarter gross domestic product data on Friday, just days after finance minister Alistair Darling predicted the economy would shrink at its fastest pace since World War Two this year. Analysts reckon output shrank by 1.5 percent over January to March, slightly slower than the 1.6 percent decline in the fourth quarter.

"The surveys on the service sector are pointing towards a figure that's not as weak as the Q4 number," said Philip Shaw, economist at Investec.

"And recent guidance from both the Monetary Policy Commitee and the chancellor yesterday suggest the figure will be in the region of the previous quarter's figure."

Recent purchasing managers' surveys seem to suggest conditions may be nearing a floor in the manufacturing and services sectors, possibly helped by the weak pound.

And Bank of England policymakers, who have slashed borrowing costs to a record low of 0.5 percent and embarked on a 75 billion pound asset buying plan to get money flowing around the economy again, reckon the pace of decline may slow further.

However, Friday's data, which will provide a snapshot of economic output, are still likely to make gloomy reading and some analysts see a small chance of a below consensus reading.

Simon Hayes, chief UK economist at Barclays Capital believes consumers and businesses will have continued to cut back on spending at a similar rate early this year as at the end of last year due to rising unemployment and the poor outlook for demand.

"The sharpest falls in GDP may have already happened but we are still talking about contracting GDP and rising unemployment for the rest of the year," he said. (Reporting by Fiona Shaikh; Editing by Ron Askew)

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