A pre-Christmas splurge in spending by the redoubtable British consumer dragged economic growth back to its historic average in the final three months of last year, according to official figures released today.

The Office for National Statistics reported that the economy grew by 0.6 per cent in the last quarter of 2005, unchanged on its initial estimate and in line with market expectations.

It was the first time since the fourth quarter of 2004 that the economy grew at its so-called trend rate of 0.6 per cent a quarter. The preceding three quarters saw growth of just 0.2, 0.5, and 0.4 per cent. The figures mean the economy grew by only 1.8 per cent last year, the lowest rate since 1992 and far worse than the 3.2 per cent recorded in 2004.

The fourth quarter recovery in growth was led by consumer spending, which increased 0.7 per cent as shoppers opened their wallets in the run up to Christmas. But many analysts questioned the sustainability of this spending, pointing to increasing imbalances in the economy.

John Butler, chief UK economist at HSBC, said: "Corporate activity continues to struggle with business investment down 1 per cent in the same period. Elsewhere, government expenditure and investment rose, meaning the public sector contributed about 0.1 of the 0.6 per cent rise."

Factories also suffered with industrial production, which accounts for around 20 per cent of GDP, falling by 0.8 per cent between the third and fourth quarters.

Howard Archer, chief UK economist at Global Insight, said: "Today’s figures bear out our belief that the firmer retail sales late in 2005 were inflated by many consumers temporarily splashing out a bit more at Christmas having limited their spending over much of last year.

"In addition, retail sales in late December were undoubtedly boosted by price conscious consumers seeking to take advantage of the best of the genuine deals in the post-Christmas sales."

Mr Archer said a number of factors including a weakening labour market, higher taxes and big increases in utility bills would dampen consumer spending over the coming months.

The Bank of England has steadfastly refused to reduce interest since from 4.5 per cent since the quarter point reduction in August believing a resurgence in consumer spending will help the economy recover strongly in 2006 with growth moving above trend by the end of the year.

Mr Butler said, today’s figures would encourage the Bank to maintain its "wait and see" policy on rates.

"In short, this update changes little, as growth in the UK was back at trend in the forth quarter but unbalanced," he said.

"The questions facing the UK remains the same: will the consumer recovery be sustained? And, will net exports and investment finally come through once government and household consumption slows?"

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