Household budgets were under pressure previous year as the fall in the pound following the Brexit vote led to prices increasing faster than wages.
There was also a better-than-expected rise in wages, although it still trails behind inflation, which stood at 3 percent in December, 2017.
Unemployment jumped by 46,000 in the three months to December, the first rise since mid-2016 and the fastest increase since the start of 2013.
The figures from the Office for National Statistics (ONS) sent the pound half a cent lower against the U.S. dollar to just over $1.39.
It helped to offset a dismal update from the construction industry, with output falling by 0.7 per cent across the fourth quarter.
Despite the revision to GDP, John Hawksworth, PwC chief economist, said: 'The big picture has not changed.
Some 90,000 more European Union migrants arrived in Britain than left in the year to September 2017, data released by the Office for National Statistics show.
"All told, then, the latest GDP data suggest that the economy remains in a fragile state and does not need to be cooled with another rate rise as soon as May".
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The central bank would raise interest rates in order to reduce inflation over a two-to-three year horizon.
Some of that increase was due to people previously classed as inactive and not looking for work moving into the workforce or registering as unemployed.
Average earnings beat forecasts, the ONS said, with earnings (both including and excluding bonuses) increasing by 2.5% over the data period, compared to an expectation of 2.4% growth.
"It's not the nicest way to get productivity but it is effective as long as GDP growth doesn't slow too", she said. The Scottish Parliament has more powers than ever before to boost the economy and promote growth and it needs to use them.
"It is troubling that instead of focussing on improving Scotland's prosperity, the Scottish Government is choosing to hike taxes for thousands of hard working Scots". Versus the euro, the pound was down 0.2% at 1.29.
Services - the biggest part of the United Kingdom economy - grew 0.6 per cent in the fourth quarter, though downward revisions to components including distribution, hotels and restaurants contributed to the revision in headline GDP.
The number of people in work fell for the first time since August 2016.