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Economy contracted in fourth quarter

The UK economy contracted by 0.3% in the last three months of 2012, according to the National Institute of Economic and Social Research (NIESR).

The NIESR blamed it on artificially strong growth in the third quarter.

If the figure is confirmed by official data later this month, it will mean that the economy returned to growth for only a single quarter.

It would also mean the economy saw zero growth for the whole of 2012.

All tickets for the Olympics and Paralympics were considered in the official statistics to have been bought in the third quarter of 2012, when the games took place.

That flattered the economy, which registered growth of 0.9% in the three-month period.

It meant that without the one-off factor the economy would have had to find considerable growth from elsewhere to avoid a contraction in the final three months of the year.

The NIESR said that without the one-off factors the economy would have been basically flat for the third and fourth quarters.

The conclusion from the NIESR is supported by some gloomy official figures released earlier in the day.

The index of production grew 0.3% in November, compared with October, but had been expected to grow more as some North Sea oil and gas production resumed following maintenance.

Construction sector output contracted 3.4% in the month.

But both sectors are much smaller than the service sector, which posted 0.1% growth in October compared with September.

Official figures for the service sector for November have not yet been released, but the widely-watched Markit/CIPS purchasing managers' index showed the sector growing at its slowest pace for two years in the month.

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