Britain's economy grinds to a halt

BRITAIN'S economy ground to a halt during the last three months of last year, ending 10 years of unbroken economic expansion. Government statisticians said today growth in gross domestic product, a measure of overall economic activity, was zero - a downward revision from an earlier estimate of 0.2% and the weakest reading since the second quarter of 1992 when Britain was in the grip of recession.

The annual growth rate was lowered from 1.9% to 1.7%, but growth for the whole of 2001 was unrevised at 2.4%.

The news pushed the prospect of higher interest rates further into the future, but market reaction was muted. Sterling was a third of a cent firmer at $1.4190 and interest-rate futures continued to price in 5% rates by the end of the year.

The downward revision was mainly due to a lower estimate of service-sector growth, now put at 0.7%. A breakdown of the data highlighted the economy's chronic imbalances. While consumer spending surged by 1.2% during the quarter, manufacturing output shrank by 1.7%.

Across the Atlantic, meanwhile, Federal Reserve chief Alan Greenspan signalled that he was cautiously optimistic about the American economic recovery.

'Even a subdued recovery, beginning soon, would constitute a truly remarkable performance for the American economy in the face of so severe a decline in equity asset values and an unprecedented blow from terrorists to the foundations of our market system,' he said.