Peter Brown
PAYdata Blog, January 27th 2011


This week saw the publication of the latest Gross Domestic Product (GDP) figures.  It was not good news.  Not only was the previous estimate of 0.8% growth for the 3rd quarter of 2010 revised downwards to 0.7%, but the first estimate for the final quarter of 2010 was for a drop in GDP of 0.5%.  This was largely unexpected and most definitely unwelcome news.

There has been talk for some time that there was the prospect of a so-called “double dip” recession but little indication until now that it was imminent.  The usual definition of a recession is a period of two quarters of negative economic growth.  By that measure, we may only be a couple of months away from a double dip.

Interestingly, the office of National Statistics (ONS) judged that the severe December weather took its toll on the economy.  Without the adverse impact of the cold and snow, we may have escaped with GDP flat or even had a little growth.

As it was, some sectors were especially hard hit.  The construction industry was a large contributor to the overall fall in GDP, with activity decreasing by 3.3% in the quarter.  Transport, storage and communication were down 0.8% and business services and finance by 0.7%.  Total services output decreased by 0.5% as did distribution, hotels and restaurants.

Fortunately, there were signs of a slight silver lining in the dark cloud.  In particular, total production output rose 0.9% in the 4th quarter of 2010.  Indeed, manufacturing made the largest contribution to the growth, where output rose 1.4%.   Output in electricity, gas and water supply as well as agriculture, forestry and fishing also increased.

With spring round the corner, the depression sits stubbornly over the country, and the threat of a double-dip recession remains.  Here’s hoping for good weather.

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