London, Jan. 24 (Bloomberg) -- Britain's economy probably expanded in the fourth quarter at its slowest pace since the beginning of last year, as industrial production shrank, analysts said in advance of today's government report. Gross domestic product, the sum of all goods and services, probably rose 0.5 percent in the last three months of 2002, down from 0.9 percent growth in the third quarter, according to the median forecast of 25 economists surveyed by Bloomberg News. ``Manufacturing is dead on its feet and there's no sign of any improvement.'' said Martin Essex, senior economist at Capital Economics, a London-based consulting firm. ``There does seem to be quite a substantial slowdown'' in GDP growth, ``and we expect that to continue into the current year.''
U.K. manufacturing, which accounts for a fifth of the world's No. 4 economy, has been hurt by a decline in exports, especially to the U.S. and the rest of Europe. Factory jobs are at a record low. Service industries including retail and banking are growing more slowly amid signs consumers are starting to rein in spending. BAE Systems Plc, Europe's biggest defense manufacturer, plans to cut more than 1,000 jobs at its shipbuilding unit. AIM Group Plc, a maker of aircraft interiors for clients including Boeing Co., said this week first-half profit fell 83 percent. In retail, Dixons Group Plc, Europe's second-largest consumer-electronics seller, expects its 2003 earnings to barely grow. A 0.5 percent increase in fourth-quarter GDP, the slowest pace of expansion since the first quarter of last year, would mean growth of 1.8 percent in 2002, analysts said. That compares with a Treasury forecast of 1.5 percent. The government will release the GDP figures at 9:30 a.m. today.
Manufacturing Slump
Industrial production, which comprises manufacturing, utilities and mining, probably dropped about 0.5 percent in the fourth quarter, economists predicted. U.K. manufacturing output last year was the weakest in the G- 7 countries, based on data from January through November, said Michael Saunders, an economist at Schroder Salomon Smith Barney. Confidence among U.K. manufacturers remained at the lowest in a year in January and more factories stood idle than at any time in the past two decades, an industry survey this week showed. The U.K.'s retail, banking and other service industries probably expanded at a slower pace of 0.7 percent in the fourth quarter, compared with 0.9 percent growth in the previous three months, analysts predicted.
`Consumer Boom's Over'
Consumer spending, which fuels two-thirds of the economy, kept Britain growing faster than most European economies in the third quarter. Germany, the region's largest, expanded 0.3 percent and France's economy grew 0.2 percent. ``The consumer boom on the scale we've seen over the last two to three years is over,'' said Richard Hyman, chairman of Verdict Research Ltd., a consultant that provides research to U.K. retailers including Tesco Plc, J Sainsbury Plc and Debenhams Plc. The Bank of England has kept interest rates at 4 percent, the lowest since 1964, for 14 months, spurring consumers to borrow and spend. That's contributed to a surge in house prices of 26 percent in the fourth quarter from a year ago, according to HBOS Plc. Britons borrowed a record amount against the rising value of their homes in the third quarter, central bank figures showed. December retail sales increased at the fastest pace in eight months, as retailers including Marks & Spencer Plc and Next Plc offered discounts on clothes and shoes. Analysts said sales growth may slow in January when the holiday clearance sales end. Futures markets indicate investors are betting on another interest rate reduction. The rate on a three-month sterling deposit maturing in June fell 2 basis points today to 3.81 percent, compared with 4.15 percent seven weeks ago. A basis point is 0.01 percentage point. //www.quote.bloomberg.com