The UK economy contracted less than previously estimated in the fourth quarter last year, as services and manufacturing output was revised higher.

Gross domestic product (GDP) of Britain fell 0.5 percent in the last quarter of 2010 compared with an earlier estimate of 0.6 percent contraction, the Office for National Statistics said on Tuesday. Markets had expected the GDP to remain unchanged at 0.6 percent in the quarter.

The fourth quarter GDP is 1.5 percent higher compared with the same quarter in the previous year.

Factory output was revised from 0.7 percent to 0.8 percent in the fourth quarter, while the drop in services output was revised to 0.6 percent from 0.7 percent.

Government spending increased by 0.4 percent, while investment declined by 1.8 percent. Exports rose 1.7 percent and consumer spending dropped by 0.3 percent.

The Bank of England (BoE) is holding off the interest rate at record low of 0.5 percent, citing uneven economic recovery, even though inflation in February was above the central bank’s target of 2 percent for the fifteenth consecutive month.

But the central bank said last week that it saw merit in waiting” to know the impact of higher oil prices before raising the rates.

The annual consumer price index (CPI) in the UK rose to 4.4 percent in February compared with 4 percent in the previous month.