UK economy contracts in fourth quarter

The UK economy is flirting with another recession after a report on Friday showed that it had contracted 0.3 percent in the fourth quarter.

The contraction was mainly driven by a 10.2 percent drop in mining and quarrying output that was mainly attributed to disruption from extended maintenance at North Sea oil and gas fields. Falls in factory output and the loss of contribution from the London Olympics also contributed to the contraction.

US economic data on Friday were a little weaker than usual. New home sales fell 7.3 percent in December. Still, builders managed to sell 367,000 new homes in 2012, the most in three years and the first annual increase in seven.

Meanwhile, the euro area continued to show signs on Friday that its financial crisis is abating.

The Ifo institute’s business climate index for Germany rose to 104.2 in January from 102.4 in December, the third consecutive increase.

The European Central Bank said banks will next week repay 137.2 billion euros of its emergency three-year loans, more than economists had forecast.